LIBRARY 

OF  THE 

UNIVERSITY  OF  CALIFORNIA. 


GIFT    OF 


Class 


IN  THE 


Supreme  Court  of  the  United  States 


OCTOBER    TERM,     1909. 


No.   725. 


STANDARD  OIL  COMPANY  BT  AL.,  Appellants, 

vs. 
THE  UNITED  STATES. 


Appeal  from  the  Circuit  Court  of  the  United  States  for  the 
Eastern  District  of  Missouri. 


BRIEF  ON  THE  LAW  ON  PART  OF  APPELLANTS. 


D.  T.  WATSON, 
JOHN  M.  FREEMAN, 
ERNEST  C.  IRWIN, 

For  Appellants. 


Smith  Bros.  Co.  Inc.,  Franklin  Print,  412  Grant  St.  Pittsburgh. 


UN1VE3S 

or 


Purpose  of  the  Brief. 

It  is  to  show — 

FIRST.  The  case  is  one  involving  the  rights  of  indi- 
vidual citizens  of  the  United  States,  whom,  the  petition 
charges,  conspired  to  and  did  restrict  and  monopolize  inter- 
state trade  in  oil  in  contravention  of  the  Sherman  Act. 

The  court  below  so  held,  and  in  that  erred,  because : 

(A)  The  Government  failed  to  so  prove: 

(B)  The  things  the  individuals  did  do  were  lawful 
and  not  forbidden  by  the  Sherman  Act. 


SECOND.  The  court  below  held  that  because  (and 
solely  because)  the  individual  joint  owners  of  a  group  of 
non-competitive  properties  engaged  for  forty  years  in  pri- 
vate trade  in  the  manufacture  and  sale  of  oil,  instead  of 
continuing  to  so  hold  through  nine  trustees  under  the  con- 
trol of  the  seven  individual  appellants,  changed  in  1899 
the  method  of  holding  their  properties  by  conveying  them 
to  the  Standard  Oil  Company  of  New  Jersey,  but  still  un- 
der the  management  of  the  seven — that  such  change  in  the 
method  of  holding  titles  was  a  violation  of  the  Sherman  Act, 
and  had  been  so  ruled  by  this  court  in  the  Northern  Securi- 
ties case. 

This,  we  submit,  is  plainly  and  markedly  erroneous. 

230494 


—II— 

THIED.  As  proven  by  the  evidence,  the  Standard  Oil 
business  as  it  existed  in  1906,  and  still  exists,  was  the  natural 
development  and  outgrowth  of  the  business  begun  in  1862, 
and  steadily  pursued  by  the  Rockefellers  and  others.  By 
untiring  energy,  with  infinite  skill — with  abundant  capital 
and  the  steady  reinvestment  of  early  profits,  these  men  and 
their  associates  created  out  of  an  entirely  new,  unique 
and  unprecedented  production  of  crude  oil,  a  new,  uni- 
versally used  and  cheapest  illuininant  the  world  has 
known.  By  creative  skill  they  secured  from  refuse  oil 
valuable  by-products.  They  invented  the  huge  reservoirs  for 
storing  oil — the  combined  pipe  line  system  which  gathers 
up  and  carries  the  natural  products — the  tank  cars  which 
carry  the  refined  product.  They  created  the  export  trade 
in  oil,  transporting  it  in  ships  of  their  own  construction,  and 
selling  it  in  Asia,  India,  China,  Japan,  Russia  and  all 
Europe.  They  devised  the  trading  stations — the  tank  de- 
livery wagons — and  used  every  means  to  cheapen  the  pro- 
duct and  the  quality.  From  1862  to  1906  (44  years)  the 
work  went  on.  They  took  the  risk  of  the  failure  in  produc- 
tion, of  destruction  by  fire  and  tempest,  besides  all  the  ordi- 
nary risks  of  trade.  They  met  all  emergencies  with  competent 
skill  and  sufficient  funds.  The  unexpected,  enormous  in- 
crease in  production  greatly  increased  their  business  and  ad- 
ded to  its  importance  and  profit.  Their  methods  of  holding 
their  joint  properties  and  the  management  of  them  were  dic- 
tated by  economic  reasons.  They  used  the  best  and  cheapest 
methods  in  the  holding  of  titles,  and  in  the  transportation, 
production,  refining  and  sale  of  oil,  and  they  sought  to  and 
did  always  produce  the  best  and  cheapest  product. 

They  competed  with  the  same  energy  and  skill  they 
built  up. 


— Ill— 

They  succeeded,  as  if  one  had  developed  unexpectedly 
a  gold  or  diamond  mine,  and  abundant  revenue  legitimately 
became  theirs. 

Their  business  thus  created  was  a  lawful  one,  and  the 
owners  thereof  were  and  are  lawfully  entitled  to  continue  the 
same,  and  if  in  1906  when  the  petition  was  filed,  they  were  not 
restricting  interstate  trade  or  by  unlawful  means  seejdng  a 
monopoly  (which  it  was  not),  the  court  should  not  have  in- 
terfered with  it. 

And  yet  without  finding  any  such  illegal  acts  or  any  il- 
legal act,  and  after  forty-four  years  of  this  toil  and  strife  and 
enterprise  and  skill  and  devotion  to  one  business,  and  after 
energies  spent  by  a  remarkable  group  of  men,  and  when  the 
narvest  was  being  gathered  for  their  nigh  half  century's 
\\ork,  then  in  1910  the  court  below  struck  them  down  and  dis- 
integrated their  organization, — and  why — 

Not  because  in  1906  they  were  restricting  interstate 
trade,  or  by  then  unlawful  means  were  maintaining  a  mo- 
nopoly— 

~Not  because  they  had  by  force  or  fraud  or  illegal  acts 
eliminated  their  competitors  and  gained  in  an  unlawful  way 
the  control  of  the  interstate  trade  in  oil — 

Bat  solely  and  only  because  in  1899  they  conveyed  all 
their  property  to  *he  Standard  Oil  Company  of  New  Jersey 
which  (the  court  below  held)  was  a  violation  of  the  Sher- 
man Act. 

Before  they  so  conveyed,  they  were  a  lawful  group, 
lawfully  doing  business — 


—IV— 

After  the  conveyance,  and  solely  by  reason  thereof,  a 
group  of  lawless  conspirators. 

With  great  respect  for  the  Bench  which  so  held,  we  sub- 
mit that  such  a  rule  is  not  justified  by  any  possible  construc- 
tion of  the  Sherman  act  nor  sanctioned  by  any  ruling  of  this 
court. 


The  Court  erred  in  making  the  decree  it  did— 


FOURTH.     In   this   equitable   proceeding   the   Sherman 
Act  only  gave  the  court  (See  Section  4)  after  petition  filed 
"setting  forth  the  case" 
" jurisdiction  to  prevent  and  restrain  violations  of 

this  Act"— 

"to  prevent  and  restrain  such  violations" 
"such  violation  shall  be  enjoined  or  otherwise  pro- 
hibited". 


The  power  is  plainly  only  preventive  and  negative; 
it  is  to  prevent  the  continuing,  then  existing  violations  of  the 
Sherman  Act — or  such  foreseen  and  expected  and  at  present 
arranged  violations. 

Yet  the  Court  below  entered  a  decree  which  (in  results) 
orders  a  dissolution  of  the  Standard  Oil  Company  of  New 
Jersey.  Divides  its  now  united  plant  into  many  units  which 
were  not  competitive,  and  compels  competition.  Creates  new 


— V— 

units  where  none  existed  before.  Prevents  the  use  of  units 
with  each  other.  Restricts  appellants  to  the  joint  ownership 
of  only  one  unit.  Segregates  into  units  properties  actually 
built  with  appellants'  money  for  necessary  joint  use  in  the 
economical  conduct  of  appellants'  business.  Regulates  the 
ownership  of  real  estate  in  different  States.  Compels  the 
appellants  to  continue  their  business  (if  at  all)  with  these 
separated  units  at  the  risk  of  an  attachment  for  contempt 
under  a  vaguely  worded  decree;  and  restricts  the  appellants 
from  any  participation  in  interstate  commerce  until  such 
dissolution  of  the  Standard  Oil  Company  of  "New  Jersey  is 
effected. 


FIFTH.  The  Government  not  having  appealed  cannot 
assign  error  to  the  decree  of  the  Court  below,  or  object  to  its 
findings  of  fact,  or  ask  to  have  additional  facts  found  which 
the  Court  below  did  not  find.  If  the  facts  found  are  not 
sufficient  to  support  the  decree,  it  must  be  reversed. 


IN  THE 


Supreme  Court  of  the  United  States 


OCTOBER    TERM,     1909. 


No.   725. 


STANDARD  OIL  COMPANY  BT  AL.,  Appellants, 

vs. 
THE  UNITED   STATES. 


Appeal  from  the  Circuit  Court  of  the  United  States  for  the 
Eastern  District  of  Missouri. 


Brief  on  the  Law  on  Part  of  Appellants. 


— 2— 

Argument. 
I. 

THE  GOVERNMENT  HAS  FAILED  TO 
MAINTAIN  THE  AFFIRMATIVE  OF  THE  IS- 
SUE MADE  BY  THE  PLEADINGS,  AND  TO 
PROVE  THAT  THE  SEVEN  INDIVIDUAL  AP- 
PELLANTS, AS  A  MATTER  OF  FACT,  WERE, 
WHEN  THE  PETITION  WAS  FILED,  IN  CON- 
TROL AND  MANAGEMENT  OF,  AND  DICTAT- 
ED TO,  THE  OTHER  DEFENDANTS  IN  THE 
BILL  IN  AN  EFFORT  TO  RESTRAIN  INTER- 
STATE TRADE  OR  MONOPOLIZE  ANY  POR- 
TION OF  THE  SAME  IN  CRUDE  PETROLEUM 
AND  ITS  PRODUCTS,  CONTRARY  TO  THE  PRO- 
VISIONS OF  THE  SHERMAN  ACT,  AND  THE 
COURT  BELOW  ERRED  IN  HOLDING  TO  THE 
CONTRARY. 

It  is  a  familiar  rule  that  when  the  Sovereign,  either 
the  State  or  the  United  States,  comes  into  a  court  as  a 
suitor,  she  stands  exactly  as  the  citizen  with  whom  she  dis- 
putes, and  can  claim  no  other  or  higher  or  greater  privileges 
than  that  citizen.  She  is  governed  by  the  same  rules  of  law 
and  equity  that  govern  the  citizen.  She  is  subject  to  the 
rules  of  pleading,  not  in  a  proceeding  like  this  under  the 
Sherman  Act  to  common  law  precision,  but  still  she  is  sub- 
ject to  those  rules  of  pleading  which  imperatively  require 
that  the  Petition  and  the  Answer  and  the  other  pleadings 
must  frame  an  issue,  and  the  issue,  when  once  framed,  is  the 
sole  point  to  which  the  testimony  in  the  case  should  be  di- 
rected ;  and  the  solution  of  the  issue  is  the  termination  of  the 
case. 


—3— 

In  Brent  vs.  The  Bank,  10  Peters,  615,  the  Supreme 
Court  said: 

"Thus  compelled  to  come  into  equity  for  a  rem- 
edy to  enforce  a  legal  right,  the  United  States  must 
come  as  other  suitors,  seeking  in  the  administration  of 
the  law  of  equity  relief.  *  *  This  court,  in 

Mitchell  vs.  U.  8.,  9  Pet.,  743,  have  recognized  the 
principle  in  the  common  law,  that  though  the  law  gives 
the  King  a  better  or  more  convenient  remedy,  he  has 
no  better  right  in  court  than  the  subject  *  *  *." 

In  The  Siren,,  7  Wallace,  154,  the  court  said  that  the 
United  States  as  a  suitor  stands: 

"in  such  proceedings,  with  reference  to  the  rights  of 
defendants  or  claimants,  precisely  as  private  suitors, 
except  that  they  are  exempt  from  costs  and  from  af- 
firmative relief  against  them,  heyond  the  demand  or 
property  in  controversy." 

No  matter  what  latitude  has  been  given  to  the  form 
of  these  petitions  under  the  Sherman  Act,  it  must  still  be 
true  that  the  Petition  must  state,  in  a  definite  and  plain 
way,  its  cause  of  action;  that  the  Answer  must  respond  to 
these  allegations,  and  the  replication  must  seal  the  issue. 

In  Sivift  &  Company  vs.  United  States,  196  U.  S.,  395, 
Mr.  Justice  Holmes  said,  in  discussing  the  sufficiency  of  a 
Petition,  that,  while  it  need  not  have  the  precision  of  an  in- 
dictment one  hundred  years  ago, 

"It  is  to  be  taken  to  mean  what  it  fairly  conveys 
to  a  dispassionate  reader  by  a  fairly  exact  use  of  Eng- 
lish speech." 


What  Should  the  Petition  Contain? 

It  should  substantially  comply  with  Eule  26  of  the  Su- 
preme Court  of  the  United  States,  and  should — 

"be  expressed  in  as  brief  and  succinct  terms  as  it  rea- 
sonably can  be." 

Daniels  Ch.  PL,  Vol.  1,  p.   314,  lays  down  the  rule 
thus: 

"In  all  cases  the  bill  must  contain  as  concisely  as 
may  be  a  narrative  of  the  material  facts,  matters  and 
circumstances  on  which  the  plaintiff  relies." 

On  star  page  605,  the  same  author  states  as  to  a  pe- 
tition, that  it — 

"must  state  the  material  facts  upon  which  the  appli- 
cation is  founded." 


Pleadings. 
What  is  the  issue  made  by  the  pleadings? 

Let  us  examine  at  some  length  the  Petition  and  its 
Prayers  and  the  Answers: 

The  charges  in  the  Petition  by  the  United  States 
(Record  Vol.  A,  page  6)  are  that  seven  men  named  as  de- 
fendants have  engaged  in  a  conspiracy  to  restrain  interstate 
trade  in  and  to  monopolize  such  trade  in  petroleum  and  its 
products.  That  in  18  TO  the  original  conspiracy  was  formed 
by  John  D.  Rockefeller,  William  Rockefeller,  and  Flagler; 
afterwards  Archbold,  Payne,  Rogers  and  Pratt,  between  1870 
and  1882,  joined  them. 


t) 

These  seven  men  are  the  individual  defendants  named 
in  the  Petition.  The  Petition  alleged  that  the  original  con- 
spiracy formed  in  1870  extended  over  the  entire  time  from 
1870  to  the  present  date  and  still  exists.  That  it  has  heen 
(Eec.  A,  p.  7), 

"a  continuing  conspiracy  organized  and  controlled  by 
the  individual  defendants  herein  and  has  assumed  va- 
rious forms  and  devices  and  has  covered  various  pe- 
riods." 

It  is  one  identical,  continuous  conspiracy  which  the 
individual  defendants  originated  in  1870,  and  have  ever 
since  continued.  Whatever  form  it  took,  it  was  one  the 
seven  individual  defendants  used  as  a  means  to  carry  it  on. 
Now  it  was  a  partnership,  now  a  limited  partnership,  now 
a  corporation,  and  now  a  trust ;  but  the  petition  with  reitera- 
tion avers  that  always  it  was  the  seven  defendants  as  indi- 
viduals in  control.  They  may  have  used  other  men 
to  help  them,  or  all  kinds  of  companies,  combinations,  cor- 
porations or  trusts,  but  always  it  was  the  seven  individuals 
who  used  them  and  were  in  control. 

Referring  to  different  pages  of  the  Petition,  we  find 
the  following  averments: 

(Rec.  A,  p.  6-7)  : 

"That  the  defendants,  John  D.  Rockefeller,  Wil- 
liam Rockefeller  and  Henry  M.  Flagler,  in  or  about 
the  year  1870,  and  at  all  times  since  said  time,  to- 
gether with  the  other  individual  defendants  herein,  who 
thereafter  from  time  to  time,  between  said  time  and 
1882,  joined  said  conspiracy,  to-wit,  Henry  H.  Rogers, 
John  D.  Archbold,  Oliver  H.  Payne  and  Charles  M. 
Pratt  entered  into  and  have  ever  since  been  engaged  in 
a  conspiracy  with  each  other,  and  with  other  persons, 
corporations,  co-partnerships  and  limited  partnerships, 


—6— 

as  hereinafter  more  particularly  stated,  to  restrain  the 
trade  and  commerce  in  petroleum,  commonly  called 
'crude  oil/  in  refined  oil,  and  in  other  products  of  pe- 
troleum, among  the  several  States  and  Territories  of 
the  United  States,  the  District  of  Columbia  and  with 
foreign  nations,  and  to  monopolize  the  said  commerce. 

"That  said  conspiracy  extended  over  the  entire 
time  since  about  the  year  1870  until  the  present  time, 
and  still  exists,  and  that  the  same  finally  in  or  about 
1899  culminated  in  the  corporate  form  of  said  conspi- 
racy, hereinafter  more  particularly  described,  which  has 
continued  during  each  and  every  year  until  the  present 
time  between  said  individual  defendants,  the  defendant 
Standard  Oil  Company  of  New  Jersey,  and  the  various 
other  corporations,  defendants  herein,  and  that  through- 
out said  period  from  about  1870  to  the  present  time, 
said  conspiracy  has  been  maintained  for  the  purpose 
and  with  the  effect  of  restraining  the  commerce  in  said 
products  among  the  several  States  and  Territories  of 
the  United  States  and  the  District  of  Columbia  and 
with  foreign  nations;  and  for  the  purpose  and  with  the 
effect  of  monopolizing  the  commerce  in  said  products 
in  and  among  the  several  States  and  Territories  of  the 
United  States  and  the  District  of  Columbia  and  with 
foreign  nations,  as  hereinafter  more  particularly  al- 
leged; that  said  conspiracy  has  been  a  continuing  con- 
spiracy, organized  and  controlled  by  the  individual  de- 
fendants herein,  and  has  assumed  various  forms  and 
devices,  and  has  covered  various  periods,  among  the 
principal  of  which  are  the  following: 

aThe  period  from  1870  to  1882 ;  the  period  from 
1882  to  1899,  and  the  period  from  1899  to  the  present 
time." 


—7— 

(Eec.  A,  p.  72  : 

"That  said  conspiracy  has  been  a  continuing  con- 
spiracy organized  and  controlled  by  the  individual  de- 
fendants herein  and  has  assumed  various  forms  and  de- 


Without  cumbering  the  record  with  further  extracts, 
see  also  following  pages  of  the  Petition  in  Volume  A:  7,  8, 
9,  11,  12,  14,  16,  18,  19,  20,  31,  32,  37,  39,  41,  42,  43,  46, 
49,  50,  57,  59,  60,  97,  98,  107,  110. 


Answers. 
Many  answers  have  been  filed,  but  they  all  agree  in  this : 

Each  unequivocally  and  broadly  denies  these  averments 
of  the  Petition.  They  deny  all  charges  that  there  ever 
was,  by  the  appellants  or  any  of  them,  a  conspiracy  in  re- 
straint of  interstate  or  foreign  trade  and  commerce  in  crude 
oil,  or  that  any  of  the  appellants  had  monopolized  or  at- 
tempted to  monopolize  interstate  or  foreign  trade  in  crude  oil 
and  its  products. 

What  is  the  Issue? 

We  have  analyzed  the  petition  and  read  its  charges  and 
the  appellants'  answer,  and  we  have  seen  that  the  issue  is  the 
charge  made  in  the  petition,  denied  in  the  answer,  and  re-as- 
serted in  the  replication,  and  it  is  that  the  seven  individuals 
(repeatedly  called  throughout  the  petition  the  "individual 
defendants,"  being  John  D.  Eockefeller,  William  Kocke- 
feller,  John  D.  Archbold,  Oliver  H.  Payne,  Henry  M. 


-8— 


Flagler,  Charles  M.  Pratt  and  Henry  H.  Rogers),  combined 
and  conspired,  and  continued  to  combine  and  conspire  at  the 
time  when  this  petition  was  filed,  to  restrain  interstate  trade 
in  oil  and  to  gain  a  monopoly  of  the  same.  It  is  reiterated 
on  half  of  the  pages  of  the  petition.  The  conspirators  are 
always  identified  as  the  "seven  individual  defendants,"  and 
it  is  averred  that  these  individual  defendants  worked  through 
various  corporations,  and  partnerships  and  limited  partner- 
ships, and  the  petition  always  alleges  that  these  individual 
defendants  controlled  all  these  partnerships  and  limited 
partnerships  and  corporations,  and  used  them  as  their  tools 
to  effectuate  the  conspiracy.  The  answer  denies  these  aver- 
ments. 

It  is  not  important  here  and  we  assume  (for  sake 
of  the  argument)  that  if  there  was  such  a  continuing 
conspiracy  (?)  as  charged  in  the  petition,  each  one  of 
the  corporations  used  by  the  seven  individual  defendants  be- 
came a  party  to  the  conspiracy  by  aiding  or  abetting  (U.  S. 
vs.  S.  0.  Company,  152  Fed.  Rep.,  294)  ;  but  the  Court 
below  said  that — 

"The  alleged  conspiracy  is  one.  Its  scheme  is  sin- 
gle. It  has  but  one  object." 

Undoubtedly,  then,  this  one  alleged  conspiracy  is  that 
charged  in  the  petition  (Rec.  A,  p.  6),  as  follows : 

"That  the  defendants,  John  I).  Rockefeller,  Wil- 
liam Rockefeller,  and  H.  M.  Flagler,  in  or  about  the 
year  1870,  and  at  all  times  since  said  time,  together 
with  the  other  individual  defendants  herein,  who  there- 
after, from  time  to  time,  between  said  time  and  1882, 
joined  said  conspiracy,  to-wit:  H.  H.  Rogers,  John  D. 
Archbold,  Oliver  H.  Payne  and  Charles  M.  Pratt,  en- 
tered into  and  have  ever  since,  been  engaged  in  a  con- 
spiracy with  each  other  and  with  other  persons,  cor- 


-9— 


porations,  co-partnerships  and  limited  partnerships,  as 
hereinafter  more  particularly  stated,  to  restrain  the 
trade  and  commerce  in  petroleum,  commonly  called 
crude  oil,  in  refined  oil  and  in  the  other  products  of 
petroleum  among  the  several  States  and  Territories  of 
the  United  States  and  the  District  of  Columbia,  and 
with  foreign  nations,  and  to  monopolize  the  said  com- 


A  conspiracy  not  originated  ~by  and  continued  and  con- 
trolled by  these  seven  individual  appellants  is  not  the  one 
charged  in  the  petition.  The  answer  denies  such  a  conspi- 
racy. 


Stated  in  the  form  of  a  question,  the  issue  is : 

Does  the  proof  show  that  these  seven  individual  appel- 
lants, the  two  Rockefellers,  Archbold,  Payne,  Elagler,  Pratt 
and  Rogers,  at  the  time  when  this  petition  was  filed,  con- 
trolled the  Standard  Oil  Company  of  ISTew  Jersey  which  has 
been  termed  the  "Holding  Company,"  and  through  the  Stand- 
ard Oil  Company  of  New  Jersey,  controlled  all  the  other 
corporations,  partnerships  and  limited  partnerships  named  in 
the  petition,  and  by  means  of  them  restrained  interstate 
trade,  and  created  a  monopoly  in  that  trade  in  oil  contrary 
to  the  provisions  of  the  Sherman  Act  ? 

The  question  primarily  involves : 

(1)  Do  the   seven   individual   appellants   control 
these  partnerships  and  corporations  ? 

(2)  Do  these  seven  thus  controlling  use  these  part- 
nerships and  corporations  to  restrain  interstate  trade  in 
and  a  monopoly  of  such  trade  in  oil  ? 


—10— 
Finding  of  the  Court  Below. 

a*  *  *  *  Evidence  in  this  case  too  volumi- 
nous for  recitation  or  review  has  convinced  that- 
prior  to  1879  these  seven  defendants  combined  to  se- 
cure and  obtained  the  control  of  companies  competing 
in  interstate  commerce  in  oil  and  suppressed  their  com- 
petition, that  they  caused  the  formation  and  execution 
of  the  trusts  of  1879  and  1882;  that  they  directed  and 
followed  that  unique  method  of  distributing  the  stock 
held  in  the  latter  trust  by  which  it  was  not  distributed 
to  the  majority  of  the  stockholders  for  many  years  after 
1892,  while  they  and  their  associates  held  the  control 
of  it  and  of  the  corporations  it  commanded;  that  they 
caused  the  stockholding  trust  of  1899  and  that  by  means 
of  that  trust  they  still  hold  the  actual  control  and  di- 
rection of  the  Standard  Company  and  of  its  subsidiary 
corporations  and  that  since  1899  they  have  been  and 
still  are  engaged  in  carrying  into  effect  and  executing 
that  trust."  (Eec.  A,  p.  577). 

We  call  special  attention  to  the  fact  that  the  court  has 
not  found  any  conspiracy  on  the  part  of  the  seven  to  unlaw- 
fully  restrict  interstate  trade  or  gain  a  monopoly.  The 
Court  did  not  find  that  we  had  done  any  of  the  unlawful 
things  charged  in  the  petition  and  denied  in  the  answer. 
The  Court  did  not  find  that  this  combination  prior  to 
1879  was  a  violation  of  the  Sherman  Act  or  forbidden  by  any 
federal  law.  Its  finding  is  that  the  seven 

"combined  to  secure  and  obtained  the  control  of  com- 
panies competing  in  interstate  commerce  in  oil  and 
suppressed  their  competition." 

But  that  did  not  necessarily,  and  unlawfully,  directly, 
immediately  and  substantially  restrict  that  trade.  The  sup- 
pression of  competition  was  after,  not  "before  the  competing 


—11— 

refinery  was  purchased  and  became  part  of  the  whole  group 
and  then  that  condition  of  entering  into  and  becoming  one 
of  a  non-competitive  group  necessarily  ended  competition. 
Private  traders  may  lawfully  combine  by  joint  ownership  to 
eliminate  a  competitor,  annex  him  as  one  of  themselves  and 
thus  suppress  his  competition,  but  they  cannot  do  this  by 
unlawful  means.  If  by  lawful  means  it  is  neither  technically 
nor  substantially  unlawful  restraint  of  interstate  trade. 

We  early  call  attention  to  the  fact  that  the  Court  has 
not  found  fraud  or  force  or  unlawful  acts  on  part  of  ap- 
pellants. 

THE  COUBT  ERRED  IN  THIS  FINDING  OF 
FACT— 

Evidence  in  the  ease  as  to  the  interests  of  the  seven 
individual  appellants  and  their  control  of  the  Standard 
Oil  Company  of  New  Jersey. 

The  evidence  in  the  case  shows  that  the  seven  indi- 
viduals do  not  own  at  the  present  time,  and  did  not  own  at 
the  time  when  the  bill  was  filed  in  this  case,  a  majority  of  the 
stock  of  the  Standard  Oil  Company  of  New  Jersey,  or  any- 
thing like  a  majority. 

The  appellants7  Exhibit  No.  1  (Vol.  18,  p.  1)  gives  a 
list  of  all  the  stockholders  of  the  Standard  Oil  Company 
of  New  Jersey  on  August  19th,  1907.  From  this  we  find 
that  there  have  been  issued  983,383  shares  of  stock,  and 
that  the  seven  individual  appellants  own  the  following  num- 
ber of  shares  each: 

John  D.  Archbold  (p.  3),  6,000  shares; 

H.  M.  Flagler  (p.  29),  30,500       " 

O.  H.  Payne  (p.  63),  40,000       " 

Charles  M.  Pratt  (p.  66),  5,000       " 

H.  H.  Eogers   (p.  71),  16,020       " 

John  D.  Rockefeller  (p.  71),  247,692       " 


—12— 

William  Kockefeller  (p.  71),  11,700       " 

Total,  356,912       " 

This  gives  to  tlie  seven  individual  appellants  between 
and  37%  of  the  total  shares  issued  by  the  Standard 
Oil  Company  of  'New  Jersey. 

It  is  also  shown  by  the  evidence  that  the  seven  individ- 
ual appellants  constituted  a  minority  on  the  Board  of  Direc- 
tors of  the  Standard  Oil  Company  of  New  Jersey. 

Petitioner's  Exhibit  'No.  8,  offered  in  evidence  by  the 
Government  itself  (see  Vol.  7,  p.  53),  gives  the  directors 
and  officers  of  the  Standard  Oil  Company  of  New  Jersey 
and  of  the  sub-companies  for  the  year  1907.  This  Exhibit 
shows  the  following  directors  of  the  Standard  Oil  Company 
of  New  Jersey  (see  Vol.  7,  page  78) : 

John  D.  Rockefeller,  Charles  M.  Pratt, 

William  Kockefeller,  E.  T.  Bedford, 

H.  M.  Magler,  Walter  Jennings, 

John  D.  Archbold,  James  A.  Moffett, 

H.  H.  Eogers,  C.  W.  Harkness, 

Wesley  H.  Tilford,  Col.  Oliver  H.  Payne, 

Frank  Q.  Barstow,  John  D.  Kockefeller,  Jr., 

A.  C.  Bedford. 

The  above  list  comprises  fifteen  directors  in  all,  of  which 
the  seven  individuals  constitute  a  minority,  the  board  stand- 
ing seven  to  eight  against  them. 

It  must  not  be  forgotten  that  Mr.  John  D.  Rockefeller 
had  not  for  years  prior  to  1906  been  in  active  touch  with  the 
business. 

See  Vol.  16,  pages  3183,  3192,  3202,  3225. 

On  page  3182  Mr.  Kockefeller  testified: 

«  #     *     *     j  nave  been  out  of  this  business  for 
the  last  fifteen  years." 


—13— 


II. 


THE  COURT  BELOW  ERRED  IN  HOLD- 
ING THAT  THE  TRANSFER  IN  1899  TO 
THE  STANDARD  OIL  COMPANY  OF  NEW  JER- 
SEY BY  THE  THEN  OWNERS,  PRIVATE  TRAD- 
ERS IN  PETROLEUM  AND  ITS  PRODUCTS,  OF 
THEIR  TITLES  TO  VARIOUS  NON-COMPETI- 
TIVE REFINERIES,  PIPE  LINES,  RESERVOIRS, 
TRADING  STATIONS,  TANK  CARS,  AND 
OTHER  PROPERTIES,  JOINTLY  USED  BY 
THEM  AS  ONE  PROPERTY  IN  THE  PRIVATE 
TRADING  BUSINESS  OF  THE  ACQUISITION, 
TRANSPORTATION,  MANUFACTURE  AND 
SALE  OF  OIL,  WAS  OF  ITSELF,  AND  REGARD- 
LESS OF  ANY  ACT  PRIOR  TO  1899,  OR  SUBSE- 
QUENT THERETO,  A  RESTRICTION  OF  INTER- 
STATE TRADE  AND  AN  ATTEMPT  TO  MONOP- 
OLIZE, BY  UNLAWFUL  MEANS,  SUCH  INTER- 
STATE TRADE,  AND  A  VIOLATION  OF  THE 
SHERMAN  ACT. 


We  submit'. 

(a)  The  Sherman  Act  permits  trusts,  combines, 
corporations  and  individuals  to  enter  into  and  compete 
for  interstate  trade  so  long  as  they  act  lawfully,  and 
the  act  does  not  seek  to  regulate  the  method  in  which 
the  properties  which  make  the  articles  that  enter  into 
interstate  trade  shall  be  held ;  nor  does  it  forbid  those 


who  enter  into  the  trade  from  doing  their  business  in 
the  form  of  a  trust  or  corporation  or  combine. 

The  method  or  form  in  which  they  carry  on  business  was 
immaterial,  provided  they  carried  it  on  lawfully. 

(b)  The  Court  below  eliminated  from  the  case, 
(for  the  purpose  of  its  opinion),  all  the  charges  in  the  pe- 
tition of  fraud,  force  or  unlawful  conduct  on  the  part  of 
appellants.   It  also  held  that  to  constitute  a  crime  under 
the  Sherman  Act  the  restriction  of  interstate  trade  must 
be  direct,  immediate,  necessary  and  material.    It  did  not 
pretend  that  the  appellants  in  transferring  their  prop- 
erties to  the  Standard  Oil  Co.  had  any  intent  to  restrict 
or  monopolize  interstate  trade  (except  as  inferred  from 
the  transfer  itself) . 

(c)  It  is  quite  certain  that  the  Standard  Oil  Co, 
of    New    Jersey    after    1899    might    legitimately    and 
properly  compete  for  interstate  trade.    Undoubtedly  the 
combination  of  the  group  of  properties  gave  it  a  great 
power  in  so  competing,  but  equally  undoubtedly  the  com- 
bination after  1899  might  lawfully  compete  for  the  inter- 
state trade  and  foreign  transportation,  provided  it  did 
not  restrain  such  trade  or  by  unlawful  means  seek  to  gain 
a  monopoly  contrary  to  the  provisions  of  the  Sherman 
Act. 

(d)  There  is  nothing  in  this  case  to  show,  and 
the  court  did  not  pretend,  that  after  1899  the  combi- 
nation did  unlawfully  compete;  did  unlawfully  restrict 
interstate  trade ;  did  by  unlawful  means  seek  to  monopo- 
lize the  interstate  trade;  yet,  such  proof  was  indispens- 


—15— 

able  to  prove  that  the  combination  was,  in  1906,  when 
the  bill  was  filed,  violating  the  Sherman  Act. 
See  the  Calumet  and  Hecla  cases : 
Judge  Knappen,  167  Fed.  Ept.,  709,  715. 
Judge  Lurton,  167  Fed.  Ept.,  727,  728. 


In  disregard  of  the  foregoing  the  Court  below  did  find 
against  appellants,  and  we  turn  to  the  opinion  to  find  out 
why  and  to  ask, 

What  did  the  court  decide? 

What  were  the  reasons  given  for  the  decision  ? 

Can  the  decision  below  be  maintained  ? 

What  Did  the  Court  Decide? 

The  Court  below  puts  its  decision  solely  on  the  grounds 
of  the  conveyance  of  1899  to  the  New  Jersey  Standard  Oil 
Company.  This  and  only  this,  the  Court  said,  was  a  viola- 
tion of  the  Sherman  Act  under  the  decision  in  the  North- 
ern Securities  Case. 

The  Court  therefore  assumed  that  prior  to  1899  and  in 
1899  the  5,000  owners  of  the  jointly  held  properties  partly 
evidenced  by  stocks  directly  held  in  the  subsidiary  companies 
and  largely  by  trust  certificates,  were  the  lawful  owners 
of  a  large  group  of  then  non-competing  properties,  used  in  the 
oil  business,  and  that  in  1899  they  were  not,  in  so  holding 
and  in  operating  their  plants,  violating  the  Sherman  Act. 


—16— 

Section  1  of  the  decree  distinctly  finds  that  the  conspir- 
acy to  restrain  trade  began  ''since  the  year  1890,"  not  before 
1890,  but  after  it. 

T\Te,  in  another  part  of  this  brief,  discuss  the  position 
of  these  owners  prior  to  and  in  1899,  and  the  validity 
of  the  Trust  Agreement  of  1882 ;  but  now  as  we  are  solely 
concerned  with  the  Opinion  of  the  Court  below,  and  that 
Court  ignored  all  acts  prior  to  1899  and  assumed  their 
validity,  we  have  to  do  likewise  to  be  fair  to  that  Court. 

The  Court  below  explicitly  and  directly  decided  this 
case  on  the  authority  of  the  Northern  Securities  Case  (193 
TJ.  S.,  197),  and  held  that  the  former  ruled  the  latter. 

That  the  Court  did  so  treat  this  case,  look  at  the  fol- 
lowing : 

The  Court  said  (Eec.,  Vol.  A,  p.  577)  : 

"The  acts  of  these  and  other  defendants  prior  to 
July  2,  1890,  did  not  violate  the  anti-trust  act  of  that 
year  because  it  was  not  then  in  existence.  Whether  or 
not  their  transactions  constituted  a  violation  of  the  com- 
mon law  is  a  question  much  discussed  which  it  is  un- 
necessary to  determine  in  this  case.  *  *  *  * 

"Laying  out  of  view  the  acts  of  the  defendants  prior 
to  July  2,  1890,  except  as  evidence  of  their  purposes 
and  of  their  continuing  conduct  and  its  effects,  does  the 
stockholding  trust  of  1899  and  its  continuing  operation 
constitute  an  illegal  restraint  of  interstate  or  inter- 
national commerce  in  violation  of  the  Anti-trust  Act  of 
1890?" 

The  Court  again  said  (Eec.  Vol.  A,  p.  585) : 

the  questions  whether  or  not  the  charges  in 
the  bill  that  other  unlawful  means  were  or  are  employed 


—17— 

are  true,  and  whether  or  not  the  power  of  the  Court  to 
prevent  the  'existence  or  continuance  of  a  monopoly  is 
limited  to  the  prohibition  of  the  use  of  illegal  means 
and  their  like  have  become  moot  and  it  is  unnecessary 
to  express  any  opinion  upon  them." 

(Rec.  Vol.  A,  p.  579),  the  court  considered  the  North- 
ern Securities  Company  case,  193  U.  S.,  stating  what  it  was 
and  asserting  that  a — 

"group  of  stock-holders  •  subsequently  trans- 

ferred their  controlling  interest  in  the  stock  of  each 
of  these  companies  to  the  Northern  Securities  Com- 
pany in  exchange  for  its  stock,  and  the  Supreme  Court 
decided  that  this  transaction  constituted  a  combination 
in  restraint  of  commerce  among  the  states  and  affirmed 
a  decree  of  this  court  which  enjoined  the  continuance 
of  its  operation.  The  defendants  and  their  associates 
acquired  the  control  of  a  majority  of  the  stock  of  more 
than  thirty  corporations  many  of  which  were  potentially 
and  naturally  competitive,  prevented  their  competition 
by  means  of  this  ownership,  and  then  by  the  transfer 
of  the  stock  of  nineteen  of  them  to  the  principal  com- 
pany in  exchange  for  its  stock  placed  in  that  company 
the  control  and  management  of  all  of  them.  If  it 
was  a  violation  of  the  anti-trust  act  to  combine  the  con- 
trol of  competitive  corporations  in  a  third  in  the  case 
of  the  Northern  Securities  Company,  why  was  it  not 
as  much  of  a  violation  of  it  to  combine  the  control  of 
ten  or  twenty  or  thirty  of  these  corporations  in  one  of 
their  number  in  the  case  in  hand  ?" 

Again  (Rec.  Vol.  A,  p.  581) : 

"It  is  true  that  railway  corporations  owe  duties 
to  the  public  which  do  not  rest  upon  trading.,  manu- 
facturing and  private  transportation  companies,  such  as 
the  duty  to  operate  continually  their  railroads  and  the 


—18— 

duty  to  carry  persons  and  property  presented  for  trans- 
portation at  reasonable  rates,  but  the  power  of  Con- 
gress to  regulate  interstate  and  foreign  commerce  and 
the  exertion  of  that  power  manifested  in  the  anti-trust 
act  embrace  all  persons  and  corporations  engaged  in 
such  commerce,  as  is  amply  illustrated  in  the  various 
applications  of  the  act  which  have  been  made  in  the 
several  decisions  here  cited.  The  mischief  against  which 
that  law  was  levelled  is  not  less  threatening  from  a 
vast  combination  of  private  corporations  owning  and 
using  in  interstate  and  foreign  commerce  property  worth 
hundreds  of  millions  of  dollars  than  from  a  combina- 
tion of  two  railway  companies.  The  act  make&  no  dis- 
tinction between  them,  it  excepts  neither  class  and  where 
Congress  has  made  no  exception  it  is  not  the  province 
of  the  courts  to  do  so.  No  countervailing  reason  over- 
comes these  considerations  and  the  vesting  of  the  ma- 
jority of  the  stock  of  many  potentially  competitive  pri- 
vate corporations  engaged  in  interstate  commerce  in  a 
holding  company  which  would  be  violative  of  the  anti- 
trust act  if  made  by  the  stockholders  of  railway  companies 
of  that  character  must  be  subject  to  the  condemnation 
of  that  statute." 

Again  (Kec.  Vol.  A,  p.  582) : 

"Counsel  argue  with  persuasive  force  that  the 
transfer  of  the  stock  of  the  nineteen  corporations  to  the 
principal  company  wrought  no  substantial  restriction  of 
competition  because  the  owners  of  that  stock  had  and 
exercised  the  same  power  of  restraint  before  that  trans- 
fer that  was  vested  in  the  Standard  Oil  Company  of 
New  Jersey  thereafter.  But  the  power  of  the  principal 
company  after  the  transfer  of  1899  to  fix  the  prices 
at  which  the  thirty  corporations  should  buy  and  sell  the 
articles  in  which  they  dealt,  the  terms  of  their  purchases 
and  sales,  their  rates  for  the  transportation  of  oil  and 


—19— 

its  products  and  all  the  infinite  details  of  their  vast 
operations  in  which  they  might  compete  and  thereby 
to  prevent  their  competition  was  greater,  more  easily 
and  quickly  exercised  and  hence  more  effective  than  it 
would  have  been  in  the  hands  of  3,000  scattered  stock- 
holders. The  trust  deed  of  1879,  the  trust  agreement 
of  1882,  the  withholding  of  the  separate  certificates  of 
shares  of  stock  in  each  corporation  from  the  holders  of 
the  trust  certificates  in  the  dissolution  of  that  trust 
until  they  took  their  shares  in  all  of  the  corporations, 
bear  convincing  testimony  to  the  soundness  of  this  pro- 
position. The  combination  formed  by  that  transfer  and 
its  power  to  restrict  competition  were  less  liable  to  be 
destroyed,  more  reliable  and  permanent  than  those  spring- 
ing from  the  joint  ownership  by  three  thousand  stock- 
holders of  each  corporation.  There  is  much  more 
probability  that  corporations  potentially  competitive  will 
separate  and  compete  when  each  of  their  stockholders 
has  a  separate  certificate  of  his  shares  of  stock  in  each 
corporation  which  he  is  free  to  sell  than  when  a  ma- 
jority of  the  stock  of  each  of  the  corporations  is  held 
by  a  single  corporation  which  has  the  power  to  vote 
the  stock  and  to  operate  them.  And  although  the  group 
of  stockholders  led  by  Mr.  Hill  and  Mr.  Morgan  had 
the  same  power  to  prevent  competition  between  the  two 
railway  companies  that  the  stockholders  of  these  cor- 
porations had  to  prevent  competition  between  them,  the 
Supreme  Court  held  in  the  case  of  the  Northern  Se- 
curities Company  that  their  transfer  of  their  stock 
to  the  holding  company  granted  to  that  corporation  a 
power  so  much  greater  and  more  effective  than  that  held 
by  the  stockholders  of  the  railway  companies  that  the 
necessary  effect  of  it  was  a  restriction  of  competition 
so  direct  and  substantial  that  it  made  it  an  illegal  com- 
bination in  restraint  of  interstate  commerce. 


—20— 

"Because  the  power  to  restrict  competition  in  inter- 
state commerce  granted  to  the  Standard  Oil  Company  of 
New  Jersey  by  the  transfer  to  it  of  the  stock  of  the 
nineteen  companies  and  of  the  authority  to  manage 
and  operate  them  and  the  other  corporations  which  they 
controlled  was  the  absolute  power  to  prevent  compe- 
tition among  any  of  these  corporations,  because  this 
power  was  greater,  more  easily  exercised,  more  effec- 
tive and  more  durable  than  that  which  the  three  thou- 
sand stockholders  of  these  corporations  previously  had, 
because  many  of  these  corporations  were  potentially  com- 
petitive and  were  engaged  in  interstate  commerce  and 
the  necessary  effect  of  the  transfer  of  the  stock  of  the 
nineteen  companies  to  the  holding  company  was,  under 
the  decision  in  the  case  of  the  Northern  Securities  Com- 
pany, a  direct  and  substantial  restriction  of  that  com- 
merce, that  transfer  and  the  operation  of  the  companies 
under  it  constituted  a  combination  or  conspiracy  in  re- 
straint of  interstate  and  international  commerce  in  vio- 
lation of  the  anti-trust  act  of  July  2,  1890." 

Judge  Hook  in  his  concurring    opinion  said  (Rec.  A, 
857). 

"The  principal  conclusions  upon  which  we  are  all 
agreed  may  be  briefly  stated  as  follows:  A  holding 
company  owning  the  stocks  of  other  concerns  whose  com- 
mercial activities,  if  free  and  independent  of  a  common 
control,  would  naturally  bring  them  into  competition 
with  each  other  is  a  form  of  trust  or  combination  pro- 
hibited by  section  1  of  the  Sherman  anti-trust  act.  The 
Standard  Oil  Company  of  New  Jersey  is  such  a  holding 
company.  The  defendants,  who  are  in  the  combina- 
tion^ are  enjoined  from  continuing  it  and  from  forming 
another  like  it." 


—21— 

In  the  decree  Section  1  the  Court  charge  that  the  con- 
spiracy began  not  in  1870  or  1882  or  prior  to  1890 — but 
"since  the  year  1890"— 

The  words  are : 

"  *  *  *  that  since  the  year  1890  the  defendants 
named  in  Section  2  of  this  decree  have  entered  into  and  are 
carrying  out  a  combination  or  conspiracy  in  pursuance  where- 
of about  the  year  1899  *  *  *"— 

The  court  then  considers  only  the  stockholding  trust 
of  1899  and  what  it  did.  It  ignores  and  thereby  as- 
sumes the  validity  of  the  trust  of  1882.  That  trust  was 
ended  in  1899,  and  now  the  Court  turns  to  the  new  one  of 
1899.  That  this  new  one  is  invalid  under  the  Sherman  Act, 
the  Court  says,  was  ruled  by  this  Court  in  the  Northern 
Securities  Case,  and  quite  an  argument  follows  to  prove  this. 
Then  the  Court  sums  up  its  conclusion  in  this  language : 

"Because  the  power  to  restrict  competition  in  inter- 
state commerce  granted  to  the  Standard  Oil  Company 
of  New  Jersey  by  the  transfer  to  it  of  the  stock  of  the 
nineteen  companies,  and  of  the  authority  to  manage  and 
operate  them  and  the  other  corporations  which  they 
controlled,  was  the  absolute  power  to  prevent  competi- 
tion among  any  of  these  corporations  because  this  power 
was  greater,  more  easily  exercised,  more  effective,  and 
more  durable  than  that  which  the  three  thousand  stock- 
holders of  these  corporations  previously  had,  because 
many  of  these  corporations  were  potentially  competitive 
and  were  engaged  in  interstate  commerce,  and  the  neces- 
sary effect  of  the  transfer  of  the  stock  of  the  nineteen 
companies  to  the  holding  company  was,  under  the  de- 
cision in  the  case  of  the  Northern  Securities  Company, 
a  direct  and  substantial  restriction  of  that  commerce, 
that  transfer  and  the  operation  of  the  companies  under 


—22— 

it  constituted  a  combination  or  conspiracy  in  restraint 
of  interstate  and  international  commerce,  in  violation 
of  the  Anti-trust  Act  of  July  2,  1890."  (A,  p.  583). 


WHAT  WERE  THE  REASONS  THE  COURT 
GAVE  FOR  SUCH  CONCLUSION  ? 

Those  reasons  are  briefly  outlined  in  the  above  extract, 
but  let  us  more  closely  examine  the  facts  as  found  in  the 
opinion  be]ow. 

The  Court  briefly  sketched  the  development  of  the 
Standard  Oil  Company  beginning  in  1865  with  the  firm  of 
Rockefeller  and  Andrews,  as  the  owner  of  a  refinery  in  Cleve- 
land, Ohio,  down  through  the  firm  of  Rockefeller,  Andrews 
&  Flagler,  owning  two  refineries ;  the  firm  of  William  Rocke- 
feller &  Company  owning  another;  the  organization  of  the 
Standard  Oil  Company  of  Ohio  in  1870,  and  the  acquisition 
by  it  and  through  it  between  1870  and  1879  of  forty  other 
refineries  located  in  various  places,  during  which  period  Mr. 
Rogers,  Mr.  Archbold,  Mr.  Payne  and  Mr.  Pratt  joined 
Rockefeller  and  Flagler  in  the  oil  business.  On  April 
9,  1879,  the  stockholders  of  the  Standard  Oil  Company  of 
Ohio  were  the  equitable  and  exclusive  or  majority  owners — 
"in  the  property  and  business  of  more  than  thirty  com- 
panies engaged  in  the  oil  business."  (Rec.  A,  p.  574). 


On  April  9,  1879,  the  legal  and  equitable  title  to  all 

these  properties  was  conveyed  to  Vilas,  Keith  and  Chester — 

"in  trust  to  hold  and  manage  them  for,  and  to  divide 

and  distribute  them  among,  the  thirty-seven  stockhold- 


—23— 

ers  of  the  Standard  Oil  Company  in  proportion  to  their 
holdings  of  the  stock  of  that  company.  (Rec.  A,  p.  574). 

That  these  trustees  managed  these  properties — 
"and  with  their  earnings  purchased  other  property  and 
the  stock  of  other  companies  until,  in  1882,  they  held 
in  this  trust  property  worth  more  than  $55,000,000.00." 

In  1882  the  legal  and  equitable  owners  of  all  these 
properties — • 

"entered  into  a  trust  agreement  to  the  effect  that" 
all  said  properties  were  conveyed  to  nine  trustees  during  their 
lives,  and  the  life  of  the  survivor  of  them,  and  for  twenty- 
one  years  thereafter,  unless  the  trust  was  sooner  dissolved  by 
vote  of  the  stockholders;  and  the  Trustees  were  given  power 
to  vote  stocks  held  by  them  and  manage  and  operate  the 
properties,  and — 

"buy  with  the  trust  funds" 

bonds  or  stocks  of  other  companies  engaged  in  a  like  business, 
and  divide  among  the  cestuis  que  trustent  the  profits. 

Six  of  the  individual  defendants  in  this  case  were 
among  the  trustees,  and  these  trustees  issued  to  their  cestuis 
que  trustent  certificates  of  the  par  value  in  the  aggregate  of 
$97,250,000.00. 

In  March,  1892,  the  Supreme  Court  of  Ohio  enjoined 
the  Standard  Oil  Company  from  further  operating  the  trust 
because  it  violated  the  laws  of  Ohio  and  was  beyond  its  cor- 
porate powers. 

The  details  of  the  dissolution  of  the  trust  are  then  given 
with  the  assertion  that — 

"the  individual  defendants,  however,  and  their  more  in- 
timate associates     *     *     *     secured  to  themselves  the 


—24— 

control  and  management  of  all  the  companies  in  that 
way  until  the  year  1899." 

The  Standard  Oil  Company  of  New  Jersey,  organized 
in  1882,  one  of  the  constituent  companies  in  the  trust  and  it- 
self owning  and  operating  refineries  called  the  Bayonne,  at 
Bayonne,  New  Jersey,  the  Eagle  Works,  at  Communipaw, 
New  Jersey,  the  Camden  Consolidated  refinery  at  Parkers- 
burg,  West  Virginia,  and  a  refinery  at  Baltimore,  Maryland, 
had  its  charter  powers  enlarged  in  1899  to  include  holding 
of  stocks  in  other  companies,  and  its  capital  increased  to 
$100,000,000,  and  the  above  described  trust  certificates  and 
other  properties  were  exchanged  for  the  stock  of  the  Standard 
Oil  Company  of  New  Jersey,  which  Company — 

"succeeded  to  the  legal  title  to  the  majority  of  the  stock 
of  the  nineteen  companies,  and  thereby  to  the  manage- 
ment and  control  of  those  companies  and  of  all  the  com- 
panies which  they  controlled."  (Rec.  A,  p.  576). 

From  1899  to  the  filing  of  the  present  Bill  in  1906— 
"the  affairs  of  the  principal  company  and  of  the  sub- 
sidiary companies  have  been  managed  by  the  former  as 
the  business  of  a  single  person."    (Rec.  A,  p.  576). 

The  par  value  of  the  capital  stock  of  the  under- 
lying companies  in  1899  was  about  $100,000,000.00; 
in  1903  more  than  $150,000,000.  The  New  Jersey 
Company  through  its  stock  ownership  is  the  owner 
of  sixteen  refineries,  besides  several  directly  owned 
by  the  said  Company  and  used  in  refining  illumin- 
ating oil  and  other  products  of  petroleum;  twelve  (12)  trans- 
portation companies,  which  owned  in  1899  only  10,749  miles 
of  gathering  lines  as  compared  with  45,227  in  1908;  and 


—25— 

3,904  miles  of  trunk  lines  in  1899,  as  compared  with  9,338 
miles  in  1908,  capable  of  transporting  oil  from  one  state  to 
another;  and  six  marketing  companies  with  3,574  selling 
stations,  and  several  producing  companies. 


The  New  Jersey  Standard  Oil  Company,  by  itself  and 
subsidiary  companies,  from  1899  to  1907  produced  more 
than  one-tenth  (1-10)  of  the  crude  oil  obtained  in  this  Coun- 
try; transported  more  than  four-fifths  (4-5)  of  the  petroleum 
derived  from  the  Pennsylvania  and  Indiana  oil  fields ;  manu- 
factured more  than  three-fourths  (3-4)  of  all  the  crude  oil 
refined  in  this  country;  owned  and  operated  one-half  of  all 
the  tank  cars;  marketed  more  than  four-fifths  (4-5)  of  the  il- 
luminating oil  sold;  exported  more  than  four-fifths  (4-5)  of 
all  the  illuminating  oil  sent  forth  from  the  United  States; 
sold  more  than  four-fifths  (4-5)  of  the  naphtha;  and  sold 
more  than  nine-tenths  (9-10)  of  the  lubricating  oil  sold  to 
railroads. 


The  Court  further  stated  that — 

aby  means  of  this  trust  (Standard  Oil  Co.  of  Jersey) 
and  the  commanding  volume  of  the  oil  business  which  it 
acquired,  thereby  secured,  and  it  has  since  exercised  and 
is  using,  the  power  to  prevent  competition  between  the 
companies  it  controls,  to  fix  for  them  the  purchase  price 
of  the  crude  oil,  the  rates  for  its  transportation,  and  the 
selling  price  of  its  products.  It  has  prevented  and  is 
preventing  any  competition  in  interstate  and  interna- 
tional commerce  in  petroleum  and  its  products  between 
its  subsidiary  companies  and  between  those  companies 
and  itself/'  (Kec.  A,  pp.  576-577). 


—26— 

That  the  seven  individual  defendants — 

"caused  the  stockholding  trust  of  1899,  and  that  by 
means  of  that  trust  they  still  hold  the  actual  control  and 
direction  of  the  Standard  Company  and  of  its  sub- 
sidiary corporations,  and  that  since  1899  they  have  been 
and  still  are  engaged  in  carrying  into  effect  and  execut- 
ing that  trust."  (Eec.  A,  p.  577). 

The  Court  then  eliminated  from  its  consideration  the 
acts  of  the  defendants  prior  to  July  2,  1890,  and  whether 
those  acts  did  or  did  not  constitute  a  violation  of  the  common 
law,  reserving  the  right  to  consider  such  acts  as  evidence  of  a 
purpose  in  similar  business  transactions  since  that  date.  The 
Court  eliminated  all  acts  prior  to  July  2,  1890;  not  some,  but 
all 

See  Ante,  page  21. 


It  is  then  plain  that  the  Court  did  not  decide  this  case 
on  the  ground  that  the  Government  in  its  petition  and 
brief  asked  it  to  do — i.  e. — that  the  Trust  Agreement  of  1882 
was  when  made  void  as  a  restriction  of  competition  as  tend- 
ing to  a  monopoly :  that  it  was  void  under  the  Sherman  Act, 
and,  as  the  Standard  Oil  Co.  in  1899  only  succeeded  to  the 
properties  of  the  Trustees,  and  as  they  did  continue  to  carry 
on  such  business,  they  restricted  competition:  that  the  ap- 


—27— 

pellants  did  certain  alleged  illegal  things  there  enu- 
merated. The  Court  declined  to  do  so,  declined  to  find  the 
facts  so  alleged  in  the  petition.  Was  not  that  practically  a 
denial  of  the  position?  It  is  expressly  noticeable  that 
the  Court  did  not  find  that  in  the  acquisition  of  our  prop- 
erties we  used  any  illegal  means — either  fraud  or  deceit  or 
intimidation.  The  Court  did  not  find  that  the  purpose  of 
making  the  trust  agreement  of  1882  was  to  smother  competi- 
tion or  gain  a  monopoly.  Or  that  in  the  strife  for  inter- 
state trade  we  used  illegal  means. 


But  the  facts  upon  which  the  Court  acted  stated  still 
more  briefly,  were : 

On  July  2,  1890,  the  nine  trustees  were  the  legal 
owners  of  all  the  properties  of  the  Ohio  Standard  Oil 
Company,  and  other  corporations  and  the  cestuis  que 
trustent  were  all  the  stockholders  of  that  Standard  Oil 
Company. 

All  this  property  was  one  entire  whole,  and  oper- 
ated as  such;  as  if  it  were  all  owned  by  one  person. 

The  combined  legal  and  equitable  titles  made  an 
indefeasible  ownership.  All  this  property  was  man- 
aged and  controlled  by  the  seven  individual  defendants 
in  this  case,  acting  through  the  nine  trustees. 

There  was  no  competition  between  or  among  any  of 
the  properties.  It  was  expressly  and  strictly  a  non-com- 
petitive group,  and  if  at  any  time  any  parcel  of  the 
group  had  been  in  any  kind  of  competition,  that  ceased 
before  1879,  and  since  then  competition  never  had  ex- 
isted. Such  parcels  of  the  group  as  were  purchased 
prior  to  1879,  had  been  so  changed  and  enlarged  that  it 
had  become,  by  1890,  (certainly  by  1899)  to  all  intents 
and  purposes,  a  new  parcel.  What  kind  of  competition, 


—28— 

if  any,  had  actually  existed  prior  to  1879  between  any 
one  unit  then  purchased  and  the  then  group,  whether 
reasonable  or  unreasonable,  the  Court  does  not  find,  re- 
garding it  as  unimportant  in  the  Court's  view  of  the 
case.  It  did  find  that  prior  to  1879  we  had  acquired 
competing  refineries,  but  how — of  what  importance — 
under  what  circumstances,  it  did  not  find.  And  it  did 
not  charge  or  find  that  our  acquisition  of  any  of  those 
properties  was  by  improper  or  unlawful  methods  or  that 
it  was  illegal  for  us  to  acquire  them. 


The  Vilas,  Keith  &  Chester  Trust  of  1879  and  the 
new  trust  of  1882  were  not,  the  opinion  assumed,  legally 
objectionable,  or  at  least  dismissed  as  immaterial,  the 
Court,  in  its  view  of  the  case,  treating  them,  at  least  for 
the  purposes  of  the  opinion,  as  methods  of  holding  prop- 
erty, which  were  not  objectionable  under  the  Federal 
law  prior  to  July  2,  1890,  or  indeed  under  the  common 
law. 

The  increase  after  1879  in  the  properties  held  in  1879, 
both  in  numbers  and  values,  was  largely  by  use  of  the  earn- 
ings of  those  properties  in  improving  those  already  held  and 
purchasing  like  properties,  and  all  this  increase  was  by  the 
persons  who  owned  them  in  1879.  The  Court  said: 

"It  is  true  with  negligible  exceptions  that  the 
stockholders  of  the  defendant  corporations  were  the 
joint  equitable  owners  of  them  from  1879  or  from  their 
subsequent  organizations  respectively  until  July  1, 
1899."  (Rec.  A,  p.  580). 


—29— 

The  owners  of  these  properties,  acting  through  the  Trus- 
tees, used  the  earnings  of  their  property  to  purchase  other 
properties  arid  enlarge  and  improve  their  own.  (Rec.  A,  p. 

574). 

And  the  Court  recognized  it  was  dealing  with  the  rights 
of  the  seven  individual  appellants:  they  were  the  ones 
charged  in  the  Bill.  The  corporations,  including  the  Stand- 
ard Oil  Company  of  New  Jersey,  were  merely  the  pawns 
in  the  game  which  the  seven  used.  The  question  always  is 
the  rights  of  the  seven  and  their  associates,  and  not  the  cor- 
porate power  or  rights  of  co<rporations.  The  separate  rights 
of  the  corporations  that  the  seven  used  in  this  case  under 
these  pleadings  were  negligible. 

The  Court  started  on  July  2,  1890,  with  a  prosperous 
enterprise  which  had  begun  in  1865  in  a  small  way  in  a  new 
and  unique  and  unprecedented  production,  which  by  the  un- 
ceasing labor,  skill  and  enterprise  of  seven  extraordinary 
men,  and  the  re-investment  of  its  earnings  and  use  of  great 
capital  had,  in  the  course  of  twenty-five  years,  developed  into 
one  of  the  great  successes  of  modern  times,  and  lawfully  so 
developed. 

What  was  it  then  the  seven  individual  appellants  and 
their  associates  did  after  July  2,  1890,  which  brought  them 
under  the  condemnation  of  the  Sherman  Act? 

Nothing  but  the  conveyance  of  these  properties  in  1899 
to  the  Standard  Oil  Company  of  New  Jersey,  and  taking  in 
lieu  thereof  stock  in  that  New  Jersey  corporation. 

It  was  the  seven  individuals,  the  Court  found,  who  did 
that: 

"*     *     *     they  caused  the  stockholdig  trust  of  1899 :" 
*     they  still  hold  the  actual  control  and  direc- 
tion of  the  Standard  Company:" 


—30— 

"*     *     *     since  1899  they  have  been  and  still  are  en- 
gaged in  carrying  into  effect  and  executing  that  trust." 

It  was  the  doing  of  that  and  that  alone  which  brought 
upon  the  seven  the  maledictions  of  the  Sherman  Act. 

See  extracts  from  Opinion  printed  ante  pages,  16  to  22. 

Up  to  1899  the  properties  under  the  trust  of  1882 
were  handled  and  used  by  the  seven,  through  the  nine 
trustees,  exactly  as  they  were  afterwards  managed  by 
the  seven  through  the  Standard  Oil  Company  of  New 
Jersey. 

The  properties  were  non-competitive  before  1899 
and  under  the  trust,  and  they  remained  exactly  as  they 
were  after  1899  under  the  Standard  Oil  Company  of 
New  Jersey. 

If  so,  how  did  a  change  by  the  seven  of  the  mere 
method  of  holding  the  properties,  the  management  re- 
maining as  before,  violate  the  Shennan  Act? 

The  Corporation,  the  Standard  Oil  Company  of 
New  Jersey,  did  not  confer  upon  the  seven  individuals 
any  new  and  greater  powers  in  the  management  of  the 
properties  than  they,  the  seven,  had  under  the  trust  of 
1882,  as  it  was  claimed  in  the  Northern  Securities  case 
that  the  charter  of  the  Northern  Securities  Co.  had  con- 
ferred upon  the  prior  owners  of  the  stocks  of  the  two 
competing  railroads.  The  properties  of  the  Standard  Oil 
group  after  they  were  conveyed  to  the  New  Jersey  cor- 
poration was  equitably  owned  by  exactly  the  same  per- 
sons in  the  same  proportions  and  held  for  the  same  uses 
and  so  used  and  with  no  added  power,  and  were  managed 
by  the  seven  exactly  the  same  as  before. 


-31— 


Why  then,  was  this  transfer  a  violation  of  the 
Sherman  Act? 


The  Court  below  said  (Ante,  pp.  IT,  21),  because  this 
Court,  in  the  Northern  Securities  Case,  193  U.  S.,  197,  321, 
322,  had  so  held. 

Did  or  does  the  Northern  Securities  Case  so  hold? 


Let  us  see: 

(a)  The  Securities  case  involved  two  competitive  rail- 
road companies  each  of  whom  owed  duties  to  the 
public  to  continue  in  operation,  and  to  carry  for  all 
alike. 


The  present  case  involves  only  the  rights  of 
seven  American  citizens  and  their  associates  manag- 
ing, through  private  trading  corporations  and  asso- 
ciations, a  private  trading  business  in  the  produc- 
tion, refining,  transportation  and  sale  of  oil.  No  one 
of  these  individuals  or  corporations  owes  any  such 
duty  to  the  public  as  the  railroad  company  does. 
The  traders  may  sell  to  one  and  refuse  to  sell  to 


—32— 

another — may  sell  at  one  price  to  one  and  to  an* 
other  at  a  less  or  greater  price :  may  wholly  cease 
to  do  business. 

There  is  hardly  a  case  in  this  court  touching 
such  questions  where  these  differences  are  not 
recognized  and  relied  upon. 


(b)  When  the  control  of  the  two  railroads  was  conveyed 
to  the  Northern  Securities  Company,  the  railroads 
were  then  not  only  bound  to  compete,  but  they  were 
in  active,  actual  competition.  "Not  only  were  they 
two  parallel  railroads  under  the  law  bound  to  com- 
pete with  each  other,  but  they  were  then  actually 
competing.  The  conveyance  of  control  of  both  to 
the  Northern  Securities  Company  gave  that  com- 
pany the  power  to  stifle  the  competition,  and  hence 
restrict  interstate  commerce.  It  was  substantially 
the  merger  of  the  two  railroads. 


In  the  present  case  the  properties  of  the  seven 
individuals  and  their  associates,  the  private  trad- 
ing corporations,  were  not,  when  conveyed  in 
1899  to  the  New  Jersey  Corporation,  in  com- 


—33— 

petition  and  really  as  they  existed  in  1899 
never  had  been.  Nor  were  they  in  1899 
bound  to  compete  with  each  other.  If  any  of 
them  ever  did  to  any  extent  compete  with  each  other, 
it  was  prior  to  1879,  at  which  time,  and  even  now 
under  Federal  Laws,  one  trading  competing  cor- 
poration might,  and  may  lawfully  buy  another. 
All  of  these  refineries  never  did  compete  with  each 
other.  If  any  did  compete  before  1879  with  the 
other  refineries  owned  in  1879,  such  refineries  were 
not  in  existence  in  1899.  The  old  fashioned,  much- 
used  and  antiquated  works  prior  to  1879,  had  given 
way  to  much  larger,  newer  constructions,  long  prior 
to  1899.  The  nature  of  the  units  that  made  up 
the  group  of  itself  largely  prevented  competition. 
The  pipe  lines,  trading  stations,  tank  cars  for  re- 
fined oil,  and  reservoirs  were  not  competitive  and 
never  had  been. 


(c)  In  the  Securities  Case  the  stocks  in  the  two  compet- 
ing railroad  companies  were,  prior  to  the  assign- 
ment to  the  Securities  Co.,  owned  by  distinct  and 
independent  bodies  of  men,  who  each  acted  inde- 
pendent of  the  other  and  had  no  interest  in  the 
other's  property.  These  two  groups  never  became 
one  until  their  stocks  were  changed  for  stock  of 
the  Northern  Securities  Company  whereby  they 
did  become  one  group. 


—34— 

In  the  present  case  before  the  transfer  of  1899 
all  the  stocks  and  properties  were  owned  in  Common 
by  all  the  stockholders,  each  one  of  the  stockholders 
having  an  interest  in  every  single  parcel  of  prop* 
erty.  There  was  only  one  group.  There  never 
had  been  but  one  since  1879.  The  transfer  in 
1899  did  not  change  the  group  or  the  ownership. 
All  remained  as  it  was  before  the  transfer. 


(d)  The  thing  the  Government  complained  of  in  the 
Securities  Case  was  that  the  power  to  control  these 
two  railroad  companies  was  put  by  Morgan,  Hill 
and  others  in  the  Securities  Company,  which 
Securities  Company  was  organized  by  them  under 
the  law  of  'New  Jersey,  for  the  express  and,  indeed, 
sole  purpose  of  holding  such  stocks.  They  claimed 
to  be  able  through  and  by  this  Corporation  to  law- 
fully acquire  and  lawfully  own  this  control,  which 
gave  to  the  Securities  Company  the  power  to  cripple 
interstate  commerce,  contrary  to  and  in  violation  of 
the  terms  of  the  Sherman  Act. 


Messrs.  Hill  and  Morgan  and  their  associates  knew  they 
could  not  directly  combine  and  themselves  jointly  hold  the 
control  of  both  railroads,  each  having  a  like  interest  in  each. 
These  two  never  did  so  jointly  hold  and  never  conspired  to 
so  hold  except  through  the  Securities  Corporation.  Their 
conspiracy  was  to  put  that  control  in  the  Securities  Company, 
which  they  thought  was  a  legal  method  of  securing  such  con- 
trol. 


—35— 

Tims  Mr.  Justice  Harlan  said  on  page  322  of  the  Securi- 
ties case  (193  U.  S.)  that  Hill  and  Morgan  and  others — 

"entered  into  a  combination  to  form  under  the  laws  of 
New  Jersey  a  holding  corporation  with  a  capital  stock 
of  $400,000,000,  and  to  which  company,  in  exchange 
for  its  own  capital  stock  upon  a  certain  hasis  and  at  a 
certain  rate,  was  to  be  turned  over  the  capital  stock,  or 
a  controlling  interest  in  the  capital  stock,  of  each  of 
the  constituent  railway  companies,  with  power  in  the 
holding  corporation  to  vote  such  stock  and  in  all  re- 
spects to  act  as  the  owner  thereof  *  *  *" 

Thus  the  Securities  Company  gained  a  new  power  that 
Hill  and  Morgan  did  not  pretend  they  had  acquired,  i.  e.,  to 
smother  competition  between  the  railroads.  They,  a?  in- 
dividuals, did  not  dare  to  put  into  their  hands  by  a  joint 
ownership  of  the  railroad  stocks  such  power  because  in  Pear- 
soil's  Case,  161  U.  S.  646,  this  Court  had  already  said  such 
a  combination  giving  such  a  power  would  be  illegal.  They 
sought  a  legal  method  of  acquiring  such  power,  and  they 
thought  the  New  Jersey  Corporation  was  the  right  way. 

The  New  Jersey  corporation  was  organized  by  them  as 
an  essential  and  indispensable  part  of  their  scheme. 


In  the  Securities  case  the  Hill  group  and  the  Morgan 
group  sought  by  their  transfer  to  the  Securities  Company  to 
gain  a  new  power — one  they  never  had  before — the  power  to 
lawfully  hold  the  power  to  smother  competition  in  two  com- 
peting railroads. 


—36— 

See  how  this  entirely  distinguishes  that  case  from  this. 


In  our  case  the  properties  after  the  combina- 
tion were  held  exactly  as  before — save  that  the  legal 
title  before  1899  was  held  by  the  Trustees  and 
after  1899  by  the  Corporation.  No  new  group  of 
owners  or  of  properties  was  formed.  No  new  or  ad- 
ditional power  was  acquired  by  the  transfer  to  the 
Standard  Oil  Company  of  New  Jersey  that  did 
not  exist  before.  Indeed  the  powers  of  the  Trus- 
tees prior  to  1899  were  greater  over  the  properties 
and  business  than  the  power  of  the  Corporation 
after  1899. 

The  Standard  Oil  Company  of  New  Jersey 
was  organized  in  1882 — as  a  Manufacturing  Cor- 
poration and  not  as  a  mere  Holding  Company.  It 
acquired  several  refineries  and  in  1899  was  en- 
gaged in  a  large  manufacturing  industry  i.  e.  re- 
fined oil. 

Its  owners,  also  the  owners  of  other  properties, 
under  the  statutes  of  New  Jersey  so  authorizing, 
enlarged  its  capital  stock  and  conveyed  to  it  their 
other  properties  as  a  convenient  economic  method 
of  managing  them. 


—37— 

(e)  The  idea  of  the  Court  below,  unsupported  by  any 
evidence  in  the  case,  that  prior  to  the  convey- 
ance to  the  Securities  Company,  Morgan  and  Hill 
had  made  a  pool  of  the  stocks  in  both  railroads  and 
thus  jointly  owned  both,  and  each  stockholder  in 
interest  in  the  stock  of  the  two  railroads,  and  that 
the  two  bodies  had  become  one  and  competition  had 
then  ceased,  is  contradicted  not  only  by  what  I 
have  already  cited,  but  by  the  following  excerpts 
from  the  opinions  of  Justices  Harlan,  Brewer  and 
White  in  the  Securities  case. 

There  was  no  completed  union  of  the  two  bodies  of 
stockholders  until  the  conveyance  to  the  securities  Company. 
Justice  Harlan  (p.  322)  : 

"Thus  as  stated  in  Article  VI  of  the  bill,  by  mak- 
ing the  stockholders  of  each  system  jointly  interested  in 
both  systems,  and  by  practically  pooling  the  earnings  of 
both  for  the  benefit  of  the  former  stockholders  of  each 
the  holding  corporation  with  not  only  the 
power  but  the  duty  to  pursue  a  policy  which  would  pro- 
mote the  interest,  not  of  one  system  at  the  expense  of  the 
other,  but  of  both  at  the  expense  of  the  public,  all  in- 
ducement for  competition  between  the  two  systems  was 
to  l>c  removed,  a  virtual  consolidation  effected,  and  a 
monopoly  of  the  interstate  and  foreign  commerce  for- 
merly carried  on  by  the  two  systems  as  independent 
competitors  established." 

(p.  324)  : 

"In  further  pursuance  of  the  combination,  the 
Securities  Company  acquired  additional  stock  of  the  de- 
fendant railway  companies." 


—38— 

(p.  325): 

The   Securities   Company  was   not   organized  in  good 
faith,  but  as  a  mere  method  of  perfecting  the  conspiracy. 

By  this  scheme — 

"the  former  stockholders  of  the  Great  Northern  Rail- 
way Company  have  received,  or  would  receive,  and  hold 
almost  fifty-five  per  cent,  of  the  Securities  Co.  stock., 
the  balance  going  to  the  former  stockholders  of  the 
Northern  Pacific  Railway  Company." 

(p.  326): 

Justice  Harlan  delineated  the  scheme — 

"of  organizing  a  corporation  under  the  laws  of  New 

Jersey  which  should  hold  the  shares  of  the  stock  of  the 

constituent   companies,     such   shareholders   in    lieu   of 

their   shares   in   those    companies   to   receive   upon   an 

agreed  basis  of  value  shares  in  the  holding  corporation." 

(p.  335)  : 

"What  the  Government  particularly  complains  of, 
indeed  all  that  it  complains  of  here,  is  the  existence  of  a 
combination  among  the  stockholders  of  competing  rail- 
road companies,  which,  in  violation  of  the  Act  of  Con- 
gress, restrains  interstate  and  international  commerce 
through  the  agency  of  a  common  corporate  trustee,  desig- 
nated to  act  for  both  companies  in  repressing  free  com- 
petition between  them." 

(pp.  333  to  347) : 

Justice  Harlan  combats  the  assertion  that  the  Northern 
Securities  Company,  as  a  stock  corporation,  might  lawfully 


—39— 

acquire  and  hold  the  control  of  the  two  competing  railroads, 
which  was  the  chief  defense  offered. 

(pp.  349-350)  : 

'That  New  Jersey  could  not  grant  power  to  the  Securi- 
ties Company  to  restrict  interstate  commerce. 

(p.  354) : 

All  the  stock  the  Securities  Company  acquired  in  the 
two  railroad  companies — 

awas  acquired  and  held  to  be  used  in  suppressing  com- 
petition between  those  companies.  It  came  into  exist- 
ence only  for  that  purpose." 

We  respectfully  insist  that  an  examination  of  Jus- 
tice Harlan's  opinion  will  demonstrate  that  the  Court 
below  unintentionally,  but  most  decidedly,  fell  into  error 
in  its  assertion  above  quoted. 

(p.  362) : 

Justice  Brewer  said: 

"There  was  a  combination  by  several  individuals 
separately  owning  stock  in  two  competing  companies,  to 
place  the  control  of  both  in  a  single  corporation.  The 
purpose  to  combine,  and  by  combination  destroy  competi- 
tion, existed  before  the  organization  of  the  corporation, 
the  Securities  Company." 

It  was  part  of  the  purpose  to  organize  the  Securities 
Company,  and  competition  itself  was  to  be  and  was  destroyed 
only  by  conveying  to  the  Securities  Company — and  not  prior 
thereto. 


—40— 

(p.  365)  : 

Justice  White  said  that  Hill  and  his  friends  owned  con- 
trol of  the  Great  Northern,  and  Mr.  Morgan  and  his  friends 
of  the  Northern  Pacific,  and  that  under  these  circum- 
stances— 

"Mr.  Morgan  and  Mr.  Hill  organized  under  the  laws  of 
New  Jersey  the  Northern  Securities  Company.  The 
purpose  was  that  the  company  should  become  the  holder 
of  the  stock  of  the  two  railroads." 


(f)  In  the  Securities  Case  the  defense  was  under  and 
relying  upon  the  power  of  the  charter  of  New  Jer- 
sey to  the  Securities  Company,  which  was  organ- 
ized solely  and  only  for  the  purpose  of  securing 
such  control  of  both  railroads  as  would  enable  it 
to  smother  the  existing  competition.  The  question 
in  that  case  was  the  power  of  the  Securities  Com- 
pany to  accomplish  such  result.  Did  it  lawfully  have 
that  power  ?  It  was  admitted  that  the  status  of 
each  stockholder  in  each  of  the  competing  railroads 
was  changed  by  the  transfer  to  the  Securities 
Company.  He  lost  his  direct  ownership  in  his 
separate  railroad,  which  he  theretofore  had,  and 
became  merely  an  owner  of  Securities  stock.  He 
became,  through  the  Securities  Company,  inter- 
ested in  two  railroads,  as  one,  and  the  management 
and  control  of  his  former  property  was  changed. 


In  the  case  at  bar,  the  Standard  Oil  Company 
of  New  Jersey  was  a  bona  fide  organization  in  1882 
to  refine  oil,  and  was  in  1899  the  owner  of  large 
refineries  and  doing  a  large  business.  As  the 
Court  below  found,  this  Company  was  one  part 
of  the  trust  property  of  1882-1899,  which  in  1899 
was  under  the  same  control  and  management  of 
the  seven  appellants  as  were  all  the  other  parcels 
of  the  trust  group.  All,  including  the  New  Jersey 
Standard  Oil  Company,  were  owned  in  common  by 
the  same  persons  and  were  not  competing.  In- 
deed, the  New  Jersey  Corporation,  (S.  O.  Co.)  was 
organized  in  1882  and  never  had  competed  with 
any  other  one  of  the  group. 

Now  by  conveying  to  the  New  Jersey  Cor- 
poration these  non-competing  properties,  the  men 
who  as  one  group  owned  them  all,  gained  no  addi- 
tional power,  and  did  not  in  the  least  change  the 
status  of  the  properties  or  the  status  of  those  who 
were  owners  of  them  prior  to  such  conveyance. 
The  properties  were  still  held  in  trust  for  them 
with  this  change,  that  before  the  conveyance  they 
had  certificates  of  the  Trustees,  afterwards  stock 
of  the  Standard  Oil  Company.  But  their  real 
interests  were  not  changed.  They  did  not  get  by 
the  transfer  an  interest  in  other  property  they  did 
not  have  before,  as  did  the  Securities  people.  They 
did  not  get  or  attempt  to  get,  or  try  to  get,  by  the 
New  Jersey  Charter,  a  power  to  suppress  competi- 
tion, either  lawfully  or  unlawfully.  There  was  no 
competition  to  suppress,  as  between  the  Jointly 
held  properties.  The  seven  appellants  were  just 
as  fully  in  control  of  all  these  properties  before 
1899  as  after  1899,  and  their  power  over  all  of  it 


—42— 

was  not  added  to  or  changed,  unless  lessened,  by 
conveyance  to  the  New  Jersey  Standard  Oil  Com- 
pany. 


In  a  word,  the  main  and  marked  difference  between  the 
two  cases  is: 

In  the  Securities  Case  the  Securities  Company  did 
gain  the  power  to  smother  then  actually  existing  com- 
petition between  two  parallel  and  competing  railroads, 
for  which  purpose  alone  it  was  organized  and  for  which 
purpose  the  stocks  were  conveyed  to  it.  The  manage- 
ment of  the  separate  railroads  was  changed.  A  new 
power  was  gained  which  was  additional  and  other  than 
the  Morgan-Hill  groups  ever  before  owned. 


As  the  Supreme  Court  of  Washington,  in  the  State  of 
Washington  vs.  Cascade  Ry.  Co.,  51  Wash.  346,  said  of  the 
Northern  Securities  Case: 

"The  ground  upon  which  the  decision  rested  was 
that  the  effect  of  the  stock  ownership  by  the  Securities 
Co.  would  be  to  stifle  competition  which  had  thereto- 
fore existed  between  the  two  railroad  companies." 


In  the  case  at  bar  the  New  Jersey  Standard  Oil 
Company  did  not  gain  any  such  power.  There  was  no 
existing  competition  to  smother.  There  was  no  effort  or 


purpose  to  give  it  that  power.  The  management  of  the 
properties  conveyed  to  it  was  not  changed,  but  was  under 
the  same  seven  who  had  it  before.  The  Trustees  under 
the  agreement  of  1882  had  larger  powers  than  the  Stand- 
ard Oil  Company  of  New  Jersey  in  1899  when  convey- 
ance was  made  to  it. 


It  is  a  true  and  fair  statement  of  the  ruling  of  the 
Court  below  to  say: 

Seven  men  controlling  for,  say  5,000  people,  70  parcels 
of  property,  devoted  to  private  business  enterprise  and  for 
which  the  5,000  held  trust  certificates  of  trustees,  in  1899 
determine  that  thereafter  the  5,000  shall  hold  stock  certifi- 
cates of  the  New  Jersey  Standard  Oil  Company  for  the  same 
properties  in  the  same  proportions  and  with  the  same  power 
and  management.  Neither  the  5,000  owners  nor  the  seven 
managers  gained  any  new  power  or  property  or  changed  their 
status  or  smothered  competition  by  the  change,  but  they  did 
gain,  as  they  think,  an  easier  and  more  economical  method 
of  holding  and  managing  the  joint  properties.  They  did  not 
intend  to  nor  did  they  manage  the  properties  after  1899,  ex- 
cept as  they  managed  them  before,  and  they  had  no  idea  of 
restricting  competition  between  their  jointly  held  properties, 
because  there  was  none  to  restrict. 


Yet  the  Court  below  held  that  the  mere  transfer  itself: 
(1)     Was  a  violation  of  the  Sherman  Act  passed  to  fur- 
ther and  protect  interstate  commerce; 


and 

(2)  That  the  Northern  Securities  Case  was  on  all  fours 
with  the  present  case,  and  ruled  it  against  appel- 
lants. 


The  error  of  the  learned  Court  in  so  ruling  is  further 
demonstrated  by  other  portions  of  its  opinion. 


Judge  Sanborn's  Opinion. 

(1)  His  Honor  overlooked  the  fact  that  in  the 
Securities  Case  there  were  then  and  before  that  Com- 
pany was  organized  and  when  the  stocks  were  trans- 
ferred to  it,  two  independent  competitive  groups 
actually  competing,  one  group  having,  with  Hill,  con 
trol  of  the  Great  Northern,  and  the  other,  with  Morgan, 
having  control  of  the  Northern  Pacific ;  but  these  groups 
never  amalgamated  or  merged  or  became  one  group  until 
after  the  conveyance  to  the  Securities  Company ;  and  by 
that  conveyance  to  the  Securities  Company  the  two 
groups  amalgamated  and  became  one,  and  thus  virtually 
and  to  all  practical  effect  the  two  parallel  competing 
railroads  were  merged  and  became  one,  and  competition 
between  them  was  smothered. 


Whereas,  in  the  case  at  bar,  all  the  properties  convey- 
ed to  the  New  Jersey  Standard  Oil  Company  were  non- 
competitive,  were  owned  by  only  one  group  of  men,  and  as 
a  fact  were  not  competing  among  themselves  or  any  of 


—45— 

themselves  and  the  Standard  Oil  Company  of  New  Jer- 
sey and  really  never  had  competed.  Competition  was 
not  smothered  by  that  conveyance,  as  in  the  Securities 
Case.  The  conveyance  to  the  New  Jersey  Standard  Oil 
Company  did  not  increase  the  power  of  the  seven,  who 
managed  these  properties,  and  certainly  such  convey- 
ances did  not  create  a  new  power  to  smother  competi- 
tion, as  in  the  Securities  case. 


(2)      The  Court  below  does  say  that — 

"Hill,  Morgan  and  their  associates  acquired  control 
of  the  two  railway  corporations  long  before  they  placed 
their  stock  in  the  Securities  Company  in  1901."  (Ree. 
A,  p.  580). 

Pearsall  vs.  G.  N.  R.  Co.,  161  U.  S.  64-6. 

"Those  companies  were  natural  and  potential  com- 
petitors, but  this  group  of  stockholders  held  the  power 
to  prevent  them  from  actively  competing,  and  it  is  as 
incredible  that  they  were  actually  doing  so  after  they 
came  under  the  control  of  that  group  as  it  is  that  the  de- 
fendant corporations  were  engaged  in  actual  competition 
in  the  nineties."  (Rec.  A,  p.  580). 


But  here  again  the  Court  overlooks  the  plain  facts  in  the 
Securities  Case  that  there  were  two  independent,  uncon- 
nected and  rival  sets  of  actually  competing  stockholders : 
the  one  group  owning  control  of  the  Great  Northern  and 
the  other  of  the  Northern  Pacific  Railway.  These  two 
groups  were  not  one  as  the  Court  below  assumed.  They 
were  pronouncedly  two.  True  if  the  two  had  united  in 


—46— 

action,  they  could  jointly  have  suppressed  competition. 
But  they  never  did  unite  in  one  group  or  in  action  until 
they  organized  the  Securities  Company  and  conveyed 
the  stock  of  both  competing  railways  to  that  Company. 
The  two  groups  existed  and  the  active  competition  ex- 
isted between  the  two  railways,  and  the  power  given  the 
Securities  Company  was  the  power  to  smother  an  actu- 
ally existing  competition,  not  one  that  had  been  in  ex- 
istence, but  had  ceased.  There  is  no  evidence  in  the 
case  that  such  competition  had  ceased,  and  this  Court 
found  directly  to  the  contrary. 

On  page  320  of  the  opinion  of  this  Court  by  Justice  Har- 
lan  in  the  Securities  case  (193  U.  S.)  he  finds: 

That  the  Great  Northern  Company  and  the  Northern 
Pacific  Company  owned  and  operated  separate  lines  of  rail- 
way which  ran  across  the  continent  and — 

"were  and  are  parallel  and  competing  lines;" 
"and  the  two  companies  were  engaged  in  active  competi- 
tion for  freight  and  passenger  traffic." 

With  that  competition  existing  and  in  active  operation, 
and  for  the  very  purpose  of  eliminating  it  and  gaining  the 
lawful  right  to  do  so,  the  Securities  Company  was  formed,  as 
hereinbefore  stated.  If  any  one  doubts  this,  please  read  the 
whole  of  Justice  Harlan's  opinion. 

Take  page  326,  in  speaking  of  the  effect  of  the  Securi- 
ties Company,  he  says: 

"Necessarily  also  the  constituent  companies  ceased  under 
such  a  combination  to  be  in  active  competition  for  trade 
and  commerce  along  their  respective  lines,  and  have  be- 
come  practically  one  powerful  consolidated  corporation, 
the  principal,  if  not  the  sole  object  of  the  formation  of 


—47— 


which  was  to  carry  out  the  purposes  of  the  original  com- 
bination, under  which  competition  between  the  constitu- 
ent companies  would  cease." 

Not  that  it  had  already  ceased,  but  that  it  "would 


cease." 


Again  on  page  362  he  says: 

"There  was  a  combination  by  several  individuals 
separately  owning  stock  in  two  competing  railroad  com- 
panies to  place  the  control  of  both  in  a  single  corpora- 
tion." 

(3)  Judge  Sanborn  says  that  some  of  the  properties 
owned  by  the  Appellants  were — 

"potentially  and  naturally  competitive:" 
"were  natural  and  potential  competitors:" 
and  their  competition  was  prevented  by  their  being  jointly 
owned  by  the  same  persons,  and  therefore  he  concludes  they 
must  be  treated  as  if  they  were  actually  competing,  and  in 
the  decree  made  it  is  sought  to  make  such  properties  actually 
compete  with  each  other. 

Potential  Competition. 

We  submit  that  the  idea  of  competition  between  prop- 
erties all  owned  by  the  same  persons  is  a  novelty.  The  idea 
that  properties  themselves  compete  and  that  if  one  man  owns 
two  or  more  he  must  compete  with  himself  is  startling.  Com- 
petition between  joint  owners  is  also  novel. 

"The  law  does  not  and  did  not  require  that  these 
parties  should  compete  in  the  purchase  of  product." 
Fairbanks  vs.  Leary,  40  Wisconsin,  642,  643. 

It  is  with  great  respect  we  urge  that  a  constructive  crime 
under  a  highly  penal  statute  is  a  novelty,  and  if  it  is  applied, 
as  it  was  in  the  Court  below,  it  widens  the  scope  of  the  Sher- 


—48— 

man  Act  and  lessens  the  scope  of  the  private  tradesmen  to 
an  unexpected  extent  and  seems  inconsistent  with  Whitwell 
vs.  Continental  Tobacco  Co.  (125  Fed.,  454). 

Competition  is  the  striving  of  two  or  more  persons,  or 
corporations,  either  individually  or  jointly,  for  one  thing, 
i.  e.,  trade;  it  is  personal  action;  the  strife  between  dif- 
ferent persons.  Properties  do  not  compete.  Their  relative 
locations  may  more  readily  enable  their  owners  to  use  them 
in  competition,  but  of  themselves  and  as  against  each  other, 
they  do  not  compete. 

The  Court  below  then  meant  that,  assuming  certain  re- 
fineries were  so  located  that  they  might  be  used,  i.  e.,  their 
product  might,  in  the  race  for  the  trade,  be  used  in  competi- 
tion, if  one  and  the  same  group  of  persons  owned  two  or  more 
of  such  refineries,  this  of  itself  violated  the  Sherman  Act — 
is  a  restraint  of  trade  and  tends  to  monopoly, — because  if 
owned  by  two  or  more  independent  groups,  each  group  would 
compete  with  each  other  group. 

This  idea  makes  the  Sherman  Act  read  that  the  same 
person  or  group  of  individuals  shall  not  own  and  operate  two 
or  more  sites  for  refineries  or  for  stores  or  any  kind  of  manu- 
factories which  might  be  used  by  different  owners  in  com- 
petitive strife. 

See  this  Court  in  the  Trans  Missouri  case,  166  U.  S., 
321,  cited  infra  (p.  55). 

Closely  looked  at,  it  would  be  simply  incredible  that  the 
Sherman  Act  could  be  so  construed,  or  that  any  Government 
would  so  shackle  and  restrict  trade.  Read  the  Sherman  Act 
and  these  results  inevitably  follow. 


The  words  "potential"  or  "naturally  competitive"  are  not 
in  the  Sherman  Act.  It  says  nothing  of  potential  compe- 
tition or  natural  competition. 

(a)  It  is  plainly  not  within  the  letter  of  the  Sherman 
Act.  If  it  is  to  he  added,  Congress  must  do  it,  not 
the  Courts. 

(h)  It  is  not  within  the  spirit  of  the  Act,  for  the  spirit 
of  the  act  is  to  further  and  increase  trade,  while 
such  a  doctrine  would  lessen  and  restrict  it 

(c)  The  man  who  violates  the  Sherman  Act  is  a  crimi- 
nal. If  the  merchant  or  manufacturer  or  trader 
owning  one  store  or  manufactory  or  plant  wishes 
for  his  increasing  trade  to  increase  his  facilities  in 
the  production  or  handling  of  his  goods,  see  how 
this  rule  cripples  him.  He  may  not  buy  the  ad- 
joining lot  for  it  undoubtedly  is — 

"potentially  and  naturally  competitive." 
The  natural  place  which  would  suit  him  would  be 
one  where  he  could  use  or  operate  it  jointly  and  in 
connection  with  his  other  places.  But  this  new 
rule  forbids  that.  It  would  be  folly  for  him  not 
to  select  a  new  site  which  would  accommodate  the 
trade  he  had ;  yet  under  this  rule  he  could  not,  for 
some  rival  of  his,  for  the  same  trade,  could  use 
such  site  to  compete. 

If  he  does  hazard  it  and  selects  a  new  site, 
which  a  jury  might  think  suitable  for  a  rival  loca- 
tion, he  is  a  criminal  and  liable  to  fine  and  im- 
prisonment, besides  punitive  penalties  and  the  re- 
strictive powers  of  a  Court  of  Chancery. 


And  Ms  under  a  statute  which  was  passed  to  fur- 
ther and  increase  trade. 


—50— 

(d)  When  we  recollect  that  this  rule  only  refers  to  the 
ownership  of  properties,  and  the  Sherman  Act  only 
covers  interstate  commerce,  the  wonder  grows. 

That  the  Court  below  thought  that  the  mere 
ownership  of  properties  by  one  which,  if  owned  by 
two  might  compete,  violates  the  Sherman  Act 
clearly  appears  from  the  language  used  in  the  opin- 
ion, Vol.  A,  pp.  578,  579 : 

"The  principal  company  and  many  of 
the  subsidiary  corporations  were  then,  and 
still  are,  engaged  in  interstate  and  interna- 
tional commerce,  many  of  them  were  capable 
of  competing  with  each  other  in  that  trade,  and 
would  have  been  actively  competing  if  they 
-  had  been  owned  ~by  different  individuals,  or 
different  groups  of  individuals" 


A  case  inconsistent  with  the  lower  court's  theory  of 
"potential  competition"  is 

State  of  Washington  ex  rel.  Cascade  'Railway  Co.  vs. 
Superior  Court,  51  Wash.  346,  98  Pac.  739  (1909). 

The  Great  Northern  and  Northern  Pacific  railroad  com- 
panies operated  competing  lines  between  Seattle  and  Spo- 
kane, Washington,  and  each  desired  to  build  an  extension 
from  Spokane  to  Portland,  Oregon.  Instead  of  building  sepa- 
rate competing  lines,  they  organized  and  each  subscribed  for 
half  the  stock  and  contributed  half  the  capital  of  a  new  rail- 
way corporation  which  constructed  the  desired  extension. 


—51— 

The  Supreme  Court  of  Washington  held  that  this  cor- 
poration jointly  controlled  was  not  in  violation  of  the  Sher- 
man Act,  saying : 

"It  is  difficult  to  understand  how  transportation 
facilities  can  be  impaired  when  two  existing  separate 
and  independent  corporations,  each  of  which  continues 
its  individual  identity,  organization  and  control,  sub- 
scribe for  the  capital  stock  of  a  newly  created  corpora- 
tion and  thereby  aid  in  building  a  railroad  which  opens 
and  serves  additional  territory.  It  would  appear  that 
the  creation  of  the  new  corporation,  instead  of  curtail- 
ing the  transportation  facilities  already  enjoyed  by  the 
public,  would  increase  the  same." 

That  court  distinguished  the  Northern  Securities  case 
because — 

"The  ground  upon  which  the  decision  rested  was 
that  the  effect  of  the  stock  ownership  by  the  Securities 
Company  would  be  to  stifle  competition  which  had  there- 
tofore existed  between  the  two  railroad  companies." 


But  the  ownership  of  properties  is  wholly  un- 
der the  laws  of  the  state.  Congress  cannot  and  does 
not  pretend  to  regulate  their  acquisition. 

Yet  this  rule  would  broaden  the  Sherman  Act 
so  that  a  federal  law  regulates  land  titles  in  the 
state. 

The  Securities  Case  (193  IT.  S.)  does  not  jus- 
tify it.  There  the  effort  was  to  merge  two  parallel 
and  actually  competing  railroads  whereby  the  com- 
petition between  them  for  interstate  traffic  would 
be  smothered  and  trade  restricted. 


—52— 

This  new  rule  would  forbid  both  the  com- 
peting raidroads  from  acquiring  adjacent  land 
to  widen  the  road-bed  of  each,  or  acquire  ad- 
ditional facilities  to  increase  its  business,  be- 
cause perhaps  some  independent  corporation 
would  buy  that  land  and  build  an  opposing 
and  competing  railroad. 

(e)     This  new  rule  of  the  Court  below  assumes: 

(1)  That  a  rival  trader  will  buy: 

(2)  That  he  will  build  a  refinery  and  operate  it: 

(3)  That  he  will  make  the  kind  of  product  that 
the  other  man  does: 

(4)  That  he  will  use  that  product  to  compete  with 
the  other  man  for  the  same  trade. 

Need  I  comment  ? 

Was  ever  such  a  crime  before  conceived  of? 

The  Sherman  Act  is  a  highly  penal  one.  In 
a  criminal  prosecution  under  the  Act  the  degree  of 
proof  is  beyond  a  reasonable  doubt. 

In  a  civil  suit  under  it,  the  degree  is  not  so 
great  but  the  proof  must  be  direct,  plain  and  con- 
vincing. 


-53— 


The  Sherman  Act  is  a  Criminal  Statute. 

United    States    vs.    Freight    Association,    58 

Fed.,  77,  Sanborn,  J. : 

"The    Anti-Trust    Act    is     a     criminal 
statute." 
Northern  Securities  Co.  vs.  United  States,  193 

U.  S.,  197,  401,  Holmes,  J.  :— 

"The  statute  of  which  we  have  to  find  the 
meaning  is  a  criminal  statute.  The  two  sec- 
tions on  which  the  Government  relies  hoth 
make  certain  acts  crimes.  That  is  their  im- 
mediate purpose  and  that  is  what  they  say. 
It  is  vain  to  insist  that  this  is  not  a  criminal 
proceeding.  The  words  cannot  be  read  one 
way  in  a  suit  which  is  to  end  in  fine  and  im- 
prisonment, and  another  way  in  one  which 
seeks  an  injunction." 

In  considering  the  degree  of  proof,  the  Su- 
preme Court  of  Missouri  said  in  State  vs.  Con- 
tinental Tobacco  Co.,  177  Missouri,  page  1 : 

"However,  it  must  be  remembered  that 
this  proceeding  partakes  of  the  nature  of  a 
criminal  prosecution,  severe  penalties  are  im- 
posed; hence,  it  is  not  sufficient  to  warrant  a 
finding  adverse  to  respondents,  that  we  may 
entertain  strong  suspicions,  or  even  strong 
probabilities  of  their  guilt.  Such  conclusions 
should  only  be  reached  upon  a  clear  showing 
of  the  testimony,  fully  satisfying  the  minds 
of  the  Court  that  they  were  guilty  of  the  viola- 
tions of  the  law  as  charged  in  the  informa- 
tion." 


(f )     Again  Judge  Sanborn  says,  speaking  of  the  Se- 
curities Case  and  the  case  at  bar: 

"For  some  time,  therefore,  before  the  transfer  in 
each  of  these  cases,  a  group  of  stockholders  controlling 
a  majority  of  the  stock  of  potentially  competitive  cor- 
porations, which  they  vested  in  the  holding  company  so 
that  the  latter  had  the  power  to  operate  them  together 
without  competition,  and  the  rule  which  governs  one 
must  control  the  other."  (Rec.  A,  p.  580). 

Here  again  is  the  fundamental  mistake  which  he  makes : 

(1)  He  says  the  two  cases  are  identical  because  before 
the  transfer  to  the  Securities  Company  there  was 
no  actual  competition  between  the  two  railroads. 

As  we  have  shown,  this  is  a  plain  mistake.  Such 
active  competition  did  exist,  and  as  we  have  shown 
ante,  it  was  to  smother  this  that  the  Securities  Com- 
pany was  formed. 

(2)  He  says  the  two  railroads  were  owned  by  the  one 
group  of  men,  just  like  all  the  Trust  properties  of 
Standard  Oil  were  owned,  which  was  that  each  in- 
dividual of  the  group  had  a  like  interest  in  both 
railroads. 

This  we  have  shown  ante  is  directly  contrary  to  the 
facts. 

(3)  He  overlooks  this  plain  distinction  between  the  two 
cases:     Even  if  it  had  been  true   (which  it  was 
not)    that  active  competition  had  ceased  between 
the  railroads,  yet  they  were  parallel  lines,  and  the 
law  of  their  being  compelled  them  to  compete.     It 
was   unlawful   for   their   owners  'not   to   compete. 
They  were  quasi  public  corporations  bound  to  com- 
pete. 


—55— 

In  our  case  we  are  individuals  owning  private  trad- 
ing corporations.  We  are  not  bound  to  compete. 
It  is  lawful  for  one  to  own  forty  refineries  and  not 
compete. 

(g)  Judge  Sanborn  says  comparing  the  two  competi- 
tive railroads  in  the  Securities  case  with  the  different  re- 
fineries in  the  Standard  Oil  case  that: 

"The  act  makes  no  distinction  between  them,  it  ex- 
cepts  neither  class  and  where  Congress  has  made  no  ex- 
ception it  is  not  the  province  of  the  Court  to  do  so.  No 
countervailing  reason  overcomes  these  considerations  and 
the  vesting  of  the  majority  of  the  stock  of  many  poten- 
tially competitive  private  corporations  engaged  in  inter- 
state commerce  in  a  holding  company,  which  would  be 
a  violation  of  the  Anti-trust  Act  if  made  by  the  stock- 
holders of  railway  companies  of  that  character  must  be 
subject  to  the  condemnation  of  that  statute." 

With  profound  respect  for  the  learning  of  the  Judge 
of  the  court  below,  we  do  not  comprehend  how,  under 
the  cases  and  consistent  with  the  principles  which  must 
govern,  he  can  say  that  there  is  no  distinction  be- 
tween competing  railroads  and  private  trading  corpora- 
tions. Each  class,  he  asserts,  is  alike  under  the  Sher- 
man Act.  One  rule  is  applicable  alike  to  each.  But 
the  authorities  are  directly  to  the  contrary. 

In  the  Trans-Missouri  Case,  166  U.  S.,  321,  Mr.  Justice 
Peckham  considered  the  difference  between  a  public  corpora- 
tion, such  as  railroad  companies,  and  private  corporations, 
which  are  really  trading  companies,  and  on  pages  320,  321 
he,  inter  alia,  said: 

"The  trader  or  manufacturer,  on  the  other  hand, 
carries  on  an  entirely  private  business  and  can  sell  to 
whom  he  pleases ;  he  may  charge  different  prices  for  the 


—56— 

same  article  to  different  individuals;  lie  may  charge  as 
much  as  he  can  get  for  the  article  in  which  he  deals, 
whether  the  price  be  reasonable  or  unreasonable ;  he  may 
make  such  discrimination  in  his  business  as  he  chooses, 
and  he  may  cease  to  do  business  whenever  his  choice  lies 
in  that  direction ;  while,  on  the  contrary,  a  railroad  com- 
pany must  transport  all  persons  and  property  that  come 
to  it,  and  must  do  so  at  the  same  price  for  the  same 
service,  and  the  prices  must  be  reasonable,  and  it  can- 
not, at  its  will,  discontinue  its  business." 


Again  on  page  324  he  said: 

"It  is  entirely  appropriate  generally  to  subject  cor- 
porations or  persons  engaged  in  trade  or  manufacturing 
to  different  rules  from  those  applicable  to  railroads  in 
their  transportation  business." 

Again  on  page  333  the  learned  Justice  said,  speaking  of 
the  railroad  corporations  and  the  business  of  such  corpora- 
tions : 

"It  is  of  such  a  public  nature  that  it  may  well  be 
doubted,  to  say  the  least,  whether  any  contract  which  im- 
poses any  restraint  upon  its  business  would  not  be  preju- 
dicial to  the  public  interests/' 

Again  on  page  333  the  Court  said: 

"It  was  said  in  Gibbs  vs.  Baltimore  Gas  Company, 
130  U.  S.,  396,  at  page  408,  by  Mr.  Chief  Justice  Ful- 
ler as  follows:  'The  supplying  of  illuminating  gas  is 
a  business  of  a  public  nature  to  meet  a  public  necessity. 
It  is  not  a  business  like  that  of  an  ordinary  corporation 
engaged  in  the  manufacture  of  articles  that  may  be  fur- 
nished by  individual  effort.  *  Hence,  while  it 


—57— 

is  justly  urged  that  those  rules  which  say  that  a  given 
contract  is  against  public  policy,  should  not  be  arbitrar- 
ily extended  so  as  to  interfere  with  the  freedom  of  a 
contract,  (Printing  &  Registering  Co.  vs.  Sampson,  L. 
E.  19  Eq.,  462),  yet  in  the  instance  of  business  of  such  a 
character  that  it  presumably  cannot  be  restrained  to  any 
extent  whatever  without  prejudice  to  the  public  inter- 
est, courts  decline  to  enforce  or  sustain  contracts  impos- 
ing such  restraint,  however  partial,  because  in  contra* 
vention  of  public  policy." 

Mr.  Justice  Harlan  in  the  Securities  Case  (193  U.  S., 
353)  said: 

"Railroad  companies,  we  said  in  the  Trans-Mis- 
souri Freight  Association  Case,  'are  instruments  of  com- 
merce, and  their  business  is  commerce  itself;'  and  such 
companies,  it  must  be  remembered,  operate  'public 
highways  established  primarily  for  the  convenience  of 
the  people,  and  therefore  are  subject  to  governmental 
control  and  regulation.7  " 

But  the  Court  below  says  the  Sherman  Act  does  not  in 
words  make  any  distinction  between  railroad  corporations 
and  private  trading  partnerships  or  corporations  and  therefore 
both  must  be  treated  alike. 

The  answers  are  many: 

(a)  This  Court,  as  above  authorities  show,  have  decided 
to  the  contrary. 

(b)  The  Sherman  Act  is  general.     It  does  embrace  all 
persons,  all  corporations,  all  combinations.     But  it 
was  passed  only  to  prevent   any  person,  any  cor- 
poration, any    combination,    from    restricting    or 
monopolizing  interstate  trade.     jSTow  different  acts 
by  different  persons  or  corporations  will  effect  com- 


—re- 
petition in  interstate  trade.     But  the  same  act  if 
done  by  two  independent  groups  will  not  necessarily 
effect  competition  under  the  Sherman  Act. 

Private  traders  may  buy  competitive  plants  and  this  does 
not,  the  law  says,  per  se,  and  of  itself  restrain  trade  and  tend 
to  monopoly.  Yet,  if  one  competitive  parallel  railroad  buys 
another  this  of  itself  and  per  se  is  illegal,  because  it  does 
restrain  trade  and  tends  to  monopoly. 


(c)  A  broad  general  statute  as  the  Sherman  Act  does 
not  go  into  detail  and  by  the  use  of  appropriate 
words  lay  down  a  special  rule  for  each  case.  It 
recognizes  the  complex  business  life  of  the  day  and 
also  recognizes  the  existence  of  other  laws,  common 
law  and  statutory  law,  and  this  new  statute  fits  into 
and  becomes  one  in  the  complex  whole.  Especially  a 
statute  like  the  Sherman  Act  does  not  disintegrate 
society  or  strike  down  other  laws  which  bear  upon 
the  same  question.  Such  a  statute,  for  example, 
does  not  pretend  to  say  to  two  competing  railroads, 
You  can  unite,  or  to  two  competing  private  traders, 
You  cannot.  It  does  not  say  that  that  which  the 
other  laws  say  is  legal,  has  become  illegal ;  that  that 
which  the  other  laws  say  does  or  does  not  constitute 
a  monopoly  or  restriction  of  competition,  is  now  no 
longer  true,  but  that  after  the  Sherman  Act  all  acts 
done  by  all  classes  of  persons  have  one  and  the  same 
significance.  It  does  not  repeal,  but  assimilates 
itself  with  and  becomes  a  part  of  the  general  mass 
of  common  law  and  statutory  law. 


—59— 

United  States  vs.  Sanges,  144  U.  S.,  311 
"This  statute,  like  all  acts  of  Congress,  and  even 
the  Constitution  itself,  is  to  be  read  in  the  light  of  the 
common  law,  from  which  our  system  of  jurisprudence  is 
derived.  *     as  aids,  therefore,  in  its  interpreta- 

tion, we  naturally  turn  to  the  decisions  in  England." 


(d)  But  the  Court  in  our  case  regards  the  group  only 
at  the  time  (1899)  of  transfer.  Then  the  whole 
group  was  non-competitive.  In  the  Securities  case 
the  two  railroad  groups  were  competitive  and  com- 
peting. 

But  notice  further: 

Who  are  the  real  appellants  in  this  case  who  are 
charged  with  restricting  competition  ? 

Why,  seven  individuals,  each  of  whom  is  a  citizen  of  the 
United  States.  Each  has  inalienable  rights  which  are  supe- 
rior to  any  corporate  rights. 


The  right  of  each  of  the  seven  to  compete  in  interstate 
trade  by  all  legitimate  methods  antedates  the  constitution 
which  C.  J.  Marshall  said  (9  Wheat  on,  211)  recognized  and 
gave  power  to  Congress  to  regulate. 


Mr.  Justice  Brewer  said  in  the  Securities  case  (supra 
(362): 

"A  corporation,  while  by  fiction  of  law  recognized 
for  some  purposes  as  a  person,  and  for  purposes  of  juris- 
diction as  a  citizen,  is  not  endowed  with  the  inalienable 
rights  of  a  natural  person/'' 


—60— 

Yet  the  Court  below,  after  expressly  avowing  that  these  seven 
were  the  real  defendants  and  it  was  their  acts  which  the  bill 
denounced,  apparently  forgets  that  and  their  rights  and  treats 
them  as  if  they  claimed  only  corporate  rights. 


The  learned  Justice    says    as    to  the  Securities    Case 
(supra) : 

"*  *  *  no  question  of  the  mere  acquisition  or 
method  of  holding  or  of  disposing  of  the  title  to  property 
was  there  or  is  here  in  issue,  that  the  question  Ehere  was 
as  it  is  here,  whether  a  certain  method  of  holding  the 
stocks  which  control  several  corporations  may  be  used  to 
prevent  competition  between  them  in  interstate  and 
international  trade." 

We  confess  to  a  difficulty  as  to  the  real  meaning — 
It  is   first  definitely   stated   that   "no  question   of  the 
mere  acquisition  or  method  of  holding  *     *     prop- 

erty was  there  or  is  here  in  issue" — 

And  yet  right  on  its  heels  comes  this 
"that  the  question  there  was  as  it  is  here  whether  a  cer- 
tain method  of  holding  the  stocks  which  control  several 
corporations  may  be  used  to  prevent  competition  be- 
tween them  in  interstate  and  international  trade." 

But  all  methods  of  holding  properties  may  be  used  to 
prevent  competition. 

Does  the  Court  here  merely  mean  that  some  methods  of 
holding  titles  are  more  readily  used  to  control  competition, 


— Gl— 

than  others,  and  that  therefore  the  Sherman  Act  does  for- 
bid certain  methods  of  holding  properties  and  carrying  on 
business  ?  If  so  what  words  in  the  Sherman  Act  say  so  and 
how  can  one  determine  what  difference  in  degree  will  consti- 
tute the  offence  under  the  Sherman  Act? 

If  one  method  of  holding  enables  the  owners  to  compete 
a  little  more  easily  than  the  other,  will  that  be  the  crime,  or 
will  it  require  a  greater  degree  of  ease?  And  who  shall  de- 
termine it  ? 


Method  of  Holding. 

No  matter  how  held  or  what  the  manner  of  holding,  if,  as 
a  fact,  the  owners  use  them  in  preventing  competition,  and 
without  the  stocks  competition  could  not  be  prevented,  and 
with  them  it  could  and  is  prevented,  and  is  prevented  merely 
by  the  holding  of  the  stocks  as  it  was  in  the  Securities  Case ; 
then  such  holding  violates  the  Sherman  Act  because  it  gives 
the  power  to  do  what  is  unlawful,  as  in  the  Securities  case, 
smother  active  competition  then  being  carried  on  between  two 
parallel  and  competing  railroads,  and  prevent  the  two 
railroads  from  competing  in  the  future,  as  it  was  their  duty 
to  do. 

The  idea  this  excerpt  seems  to  imply,  that  the  mere 
method  of  holding  the  stocks  was  itself,  and  aside  from  the 
power  to  stifle  competition,  a  violation  of  the  Sherman  Act, 
is  a  new  reading  of  that  much-abused  and  much-construed 
act. 

His  Honor  not  only  implies,  but  he  assumes,  at  least 
for  the  case,  that  the  control  of  the  seven  through  the  Trus- 
tees under  the  agreement  of  1882  of  all  this  property  was  not 


—62— 

a  violation  of  the  Sherman  Act,  but,  and  only  but,  and  only 
because,  all  such  properties  were  conveyed  to  the  Standard 
Oil  Company  of  New  Jersey,  that  and  only  that,  and  of  itself, 
is  a  violation  of  the  Sherman  Act. 

In  plain  language  he  so  decides.  The  words  he  uses 
are: 

a*  *  *  THAT  transfer  (1899)  and  the  opera- 
tion of  the  companies  under  it  constituted  a  combina- 
tion or  conspiracy  in  restraint  of  interstate  and  inter- 
national commerce,  in  violation  of  the  Anti-Trust  Act 
of  July  2,  1890." 

And  he  says  that  this  was  the  question  in  the  Securities 
Case.  It  was  what  the  Government  complained  of  in  that 
case. 

But  here  again  His  Honor  seems  to  ignore  what  this 
Court  said  the  complaint  of  the  Government  was.  On  page 
335  Mr.  Justice  Harlan  said: 

"What  the  Government  particularly  complains  of, 
indeed  all  it  complains  of  here,  is  the  existence  of  a  com- 
bination among  the  stockholders  of  competing  railroad 
companies  which,  in  violation  of  the  Act  of  Congress, 
restrains  interstate  and  international  commerce  through 
the  agency  of  a  common  corporate  trustee  designated  to 
act  for  both  companies  in  repressing  free  competition 
between  them.  Independently  of  any  question  of  the 
mere  ownership  of  stock  or  of  the  organization  of  the 
State  corporation,  can  it  in  reason  be  said  that  such  a 
combination  is  not  embraced  by  the  very  terms  of  the 
anti-trust  act." 


—63— 

The  charge  of  the  Government  in  its  Bill  in  the  Securi- 
ties Case  was  stated  by  Mr.  Justice  Harlan  in  that  case  (p. 
322)  in  this  way: 

"Thus  as  stated  in  Article  VI  of  the  hill  'by  mak- 
ing the  stockholders  of  each  system  jointly  interested  in 
both  systems  and  by  practically  pooling  the  earnings  of 
both  for  the  benefit  of  the  former  stockholders  of  each, 
and  by  vesting  the  selection  of  the  directors  and  officers 
of  each  system  in  a  common  body,  to-wit,  the  holding 
corporation,  with  not  only  the  powers  but  the  duty  to 
pursue  a  policy  which  would  promote  the  interests  not 
of  one  system  at  the  expense  of  the  other,  but  of  both 
at  the  expense  of  the  public,  all  inducement  for  com- 
petition between  the  two  systems  was  to  be  removed,  a 
virtual  consolidation  effected,  and  a  monopoly  of  the 
interstate  and  foreign  commerce  formerly  carried  on  by 
the  two  systems  as  independent  competitors  estab- 
lished.' " 

And  notice  too,  the  error  of  the  Court  below  as 
to  the  position  of  the  individuals  who  assigned  to  the 
Securities  Company,  and  what  each  got  in  return,  as  com- 
pared with  the  case  at  bar: 


In  the  Securities  case  the  individuals  were  separate 
owners  in  either  the  Great  Northern  or  the  Northern  Pacific 
Railways,  but  not,  with  rare  exceptions,  owners  in  both.  He 
assigned,  for  example,  one  hundred  (100)  shares  of  Northern 
Pacific,  and  the  Securities  Company  gave  him,  say,  one  hun- 
dred (100)  shares  of  its  own  capital  stock,  but  the  sole  prop- 
erty of  the  Securities  Company  was  the  capital  stock  of  both 
the  Great  Northern  and  the  Northern  Pacific,  so  that  when  the 
assignments  to  it  (the  Securities  Company)  of  all  the  stocks  in 
each  of  these  railways  were  completed,  and  it  had  issued  in  lieu 
thereof  to  the  stockholders  who  thus  assigned  its  (Securities 


Company)  own  stock,  each  of  the  old  holders  of  stock  in  the 
Northern  Pacific  and  the  Great  Northern  became  interested 
in  both  the  Northern  Pacific  and  Great  Northern.  The  ma- 
jority of  the  stockholders  of  the  Securities  Company  con- 
trolled both  the  old  railroads.  Their  management  was 
changed. 

In  the  case  at  bar,,  the  holders  of  trust  certificates  under 
the  Agreement  of  1882  hold  an  interest  jointly  in  all  the  prop- 
erties of  the  Trust.  If  the  holder  had,  after  1892,  helped  to 
dissolve  the  Trust,  he  had  received  an  assignment  of  a  proper- 
tional  interest  in  each  one  of  all  these  properties,  i.  e.,  the 
stocks  of  each.  But  in  truth,  whichever  way  he  held  the  in- 
terest was  jointly  with  all  the  other  owners.  All  were  in- 
terested in  each  property.  All  the  properties  were  man- 
aged and  controlled  by  the  seven  defendants. 


Now  what  change  was  there  after  the  assignment  to 
the  Standard  Oil  Company  of  New  Jersey  ? 


Just  this: 

Each  still  had  the  identical  interest  which  he  had  be- 
fore the  assignment.  The  sole  change  was  that  before  the 
assignment  he  held  trustees'  certificates  or  assignments,  and 
after  the  assignment,  stock  certificates  in  the  Standard  Oil 
Company  of  New  Jersey.  He  gained  no  additional  interest 
in  any  other  property,  and  especially  competing  properties, 
by  the  assignment,  as  did  the  stockholders  in  the  Securities 
Case. 

The  management  of  all  the  properties  was  not  changed 
as  it  was  in  the  Securities  Case,  but  the  seven,  tne  Court  be- 
low held,  remained  in  control  after  such  assignment  as  be- 


UNIVERSITY 


fore.  The  stockholders  of  the  Standard  Oil  Company  of  New 
Jersey  had  no  other  powers  whatever,  except  what  they  had 
before  the  assignment,  while  in  the  Securities  Case  each  of 
the  separate  stockholders  in  each  of  the  railroads  got  a  new 
interest  in  the  other  railroad,  and  a  majority  of  the  stock- 
holders in  the  Securities  Company,  a  power  they  never  before 
had,  to  control  competition  and  to  act  together  as  one  body 
with  one  interest,  and  not  two  bodies  with  distinct  interests. 


Why  did  the  Court  below  think  the  mere  transfer  to  the 
Standard  Oil  Company  of  New  Jersey,  as  made  of  itself  and 
by  itself,  a  violation  of  the  Sherman  Act  ? 

Its  reasons  we  give  in  its  own  words: 

"But  the  power  of  the  principal  company,  after  the 
transfer  in  1899,  to  fix  the  prices  at  which  the  thirty 
corporations  should  buy  and  sell  the  articles  in  which 
they  dealt,  the  terms  of  their  purchases  and  sales,  their 
rates  for  the  transportation  of  oil  and  its  products,  and 
all  the  infinite  details  of  their  vast  operations  in  which 
they  might  compete,  and  thereby  to  prevent  their  com- 
petition, was  greater,  more  easily  and  quickly  exercised, 
and  hence  more  effective  than  it  could  have  been  in  the 
hands  of  3,000  scattered  stockholders.  The  trust  deed  of 
1879,  the  Trust  Agreement  of  1882,  the  withholding  of 
the  separate  certificates  of  shares  of  stock  in  each  cor- 
poration from  the  holders  of  the  trust  certificates  in  the 
dissolution  of  that  trust  until  they  took  their  shares  in 
all  of  the  corporations,  bear  convincing  testimony  to  the 


—66— 

soundness  of  this  proposition.  The  combination  formed 
by  that  transfer  and  its  power  to  restrict  competition 
were  less  liable  to  be  destroyed,  more  reliable  and  per- 
manent than  those  springing  from  the  joint  ownership 
by  three  thousand  stockholders  of  each  corporation." 
(Eec.  A,  p.  582). 

The  Court  below  then  did  not  claim  that  the  assignment 
to  the  Standard  Oil  Company  gave  that  Company  any  new  or 
additional  power  to  stifle  competition  than  it  had  before,  for 
it  said: 

"Counsel  argue  with  persuasive  force  that  the 
transfer  of  the  stock  in  the  nineteen  corporations  to  the 
principal  company  wrought  no  substantial  restriction  of 
competition  because  the  owners  of  that  stock  had  and 
exercised  the  same  power  of  restraint  before  that  trans- 
fer that  was  vested  in  the  Standard  Oil  Company  of 
New  Jersey  thereafter."  (Rec.  A,  p.  582). 

Then  follows  the  previous  quotation. 

Now  here  is  the  new  test  as  to  whether  a  business  comes 
under  the  Sherman  Act.  It  merely  depends  on  how  it  is  or- 
ganized. 

Take  any  large  private  business,  whatever  its  organiza- 
tion as  a  trust  or  partnership.  It  desires  to  re-organize  to 
more  economically  and  easily  handle  its  business,  but  it  does 
not  give  to  the  new  re-organization  any  additional  power  it 
did  not  before  have,  or  change  the  persons  who  own  it  and 
its  properties,  or  change  its  management.  Yet,  if  by  this  new 
re-organization,  it  could  the  more  easily  and  quickly  fix 
prices  and  the  terms  of  purchase  and  sale,  the  rates  for  trans- 
portation of  its  products,  and  all  the  infinite  details  of  its  vast 
operation  in  which  it  might  compete  and  thereby  pre- 
vent competition,  it  is,  the  Court  below  says,  a  violation  of 


—67— 

the  Sherman  Act,  not  because  it  prevents  competition  by  out- 
siders, but  merely  competition  between  the  jointly  held  prop- 
erties. 

Why? 

Because  its  power  is 

(a)  less  liable  to  be  destroyed. 

(b)  more  reliable  and  permanent  than  it  wag  before. 
The  power  is  the  same  after  as  before  the  transfer.     It 

is  exactly  the  same  power,  but  it  has  become  more  permanent 
and  reliable,  and  this  violates  the  Sherman  Act. 

The  words  of  the  Court  in  the  foregoing  excerpt 

"in  which  they  might  compete  and  thereby  to  pre- 
vent competition," 

refer  solely  to  the  business  of  the  organization  which  it  would 
be  possible  for  its  owners  to  split  up  and  have  the  parts  com- 
pete with  each  other.  This  the  joint  owners  are  not  bound 
to  do.  Each  individual  may  own  all  the  refineries  which  his  in- 
dustry, his  skill  or  his  capital  enables  him  to  acquire.  He 
may  join  others  with  him  in  such  acquisition  and  owner- 
ship, and  if  he  has  lawfully  acquired  he  may  lawfully  own 
and  use.  The  number  of  plants  he  owns  is  immaterial  if  he 
or  they  lawfully  acquired  them. 

But  how  could  the  parts  compete  with  each  other — each 
part  is  owned  by  the  same  individuals  and  in  the  same  pro- 
portions— If  they  competed  it  would  be  with  themselves 
which  is  evidently  absurd. 

Assume,  as  the  Court  below  did,  that  our  acquisitions  up 
to  1899  were  lawful,  and  before  the  transfer  we  lawfully 
owned  them,  there  was  no  obligation  on  the  part  of  the  own- 
ers to  compete  with  each  other  before  or  after  the  transfer. 


—68— 

The  Court  said : 

Your  joint  ownership  of  so  many  plants  gives  the  power 
to  stifle  competition. 

But  our  answer  is  in  the  words  of  the  Court  below : 

monopolies  of  part  of  interstate  and 
international  commerce  by  legitimate  competition,  how- 
ever successful,  are  not  denounced  by  the  law  and  may 
not  be  forbidden  by  the  courts."  (Rec.  A,  p.  585). 

As  was  shown  in  Whitwell  vs.  The  Tobacco  Co.,  (125 
Fed.  454),  by  the  same  learned  judge,  if  the  power  was  law- 
fully acquired  in  a  private  trading  enterprise,  the  Sherman 
Act  does  not  condemn  it. 


If  the  magnitude  of  our  acquisitions  gives  certain  power, 
it  only  gives  power  rightfully  acquired.  Certainly  the  Sher- 
man Act  does  not  put  limits  to  the  acquisition  of  wealth. 


Judge  Hook  in  the  Court  below  said : 

"Magnitude  of  business  does  not  alone  constitute  a 
monopoly,  nor  effort  at  magnitude  an  attempt  to  monop- 
olize." (Rec.  A,  p.  589). 


—69- 


Because  and  only  because    by  the  change  we  could,  the 
Court  said: 

(a)  more  readily  and  easily  fix  prices; 

(b)  and  the  terms  of  purchase  and  sale  of  their  prod- 
ucts; 

(c)  and  the  rates  for  the  transportation  of  oil; 

(d)  and  the  infinite  details  of  our  business: 

we  had  committed  the  crime  of  violating  the  Sherman  Act. 

This  brought  us  under  the  Sherman  Act,  though  be- 
fore that  we  were  not  under  it. 


But  the  Sherman  Act  says  nothing  about  the  methods 
in  which  one  may  carry  on  business.  So  far  as  that  Act  is 
concerned  all  methods  are  lawful  provided  the  one  selected 
is  not  used  for  the  purpose  of  violating  the  Sherman  Act. 


Because 

(e)  the  conveyance  to  the  Standard  Oil  Company  ren- 
dered our  organization  more  stable  and  permanent ; 

(f)  and  it  was  less  likely  that  the  business  would  con- 
tinue as  one  under  the  old  agreement  of  1882  than 
under  the  new  agreement  of  1899 ; 

we  had  walked  out  of  safety  and  most  unknowingly  to 
ourselves,  had  violated  the  Sherman  Act,  and  had  become 
criminals. 


—70— 

If  this  be  so  the  Sherman  Act  controls  the  methods  in 
which  individuals  or  corporations  must  hold  properties  in 
the  state  if  they  want  to  do  interstate  commerce. 

We  always  supposed  Congress  had  naught  to  do  with  that, 
and  that  this  Court  had  expressly  so  ruled : 

Fuller,  C.  J.,  said  in  the  Knight  Case,  156  U.  S.,  16, 
that  Congress  did  not  attempt  by  the  Sherman  Act  to 

"assert  the  power  to  deal  with  monopoly  directly  as 
such,  or  to  limit  and  restrict  the  rights  of  corporations 
created  by  the  States  or  the  citizens  of  the  State  in  the 
acquisition,  control  or  disposition  of  property  *  *  * 
or  to  make  criminal  the  acts  of  persons  in  the  acquisi- 
tion and  control  of  property  which  the  States  of  their 
residence  or  creation  sanctioned  or  permitted." 

Northern  Securities  Co.  vs.  United  States,  193  U.  S., 
197,  346,  Harlan,  J. : 

"The  Federal  Court  may  not  have  power  to  for- 
feit the  charter  of  the  Securities  Company;  it  may  not 
declare  how  its  shares  of  stock  may  be  transferred  on  its 
books,  not  prohibit  from  acquiring  real  estate,  nor  dim- 
inish or  increase  its  capital  stock.  All  these  and  like 
matters  are  to  be  regulated  by  the  State  which  created 
the  company." 


Eidd  vs.  Pearson,  128  U.  S.,  1. 

Now  how,  seven  individuals  hold  their  real  and  per- 
sonal property,  depends  solely  on  State  laws.  The  United 
States  has  no  power  over  that.  Whether  these  seven  see  fit 
to  hold  it  as  tenants  in  common  or  joint  tenants  or  as  part- 
nership property  or  under  a  limited  partnership  or  under 
a  corporate  organization,  is  solely  and  only  for  the  State  to 


determine.  ISTo  one  of  these  methods  more  than  another 
looks  toward  or  does  tend  to  interfere  with  or  restrict .  in- 
terstate commerce.  Certainly  the  change,  as  in  this  case,, 
from  nine  trustees  holding  all  the  property  to  it  being  held  by 
a  corporation  does  not,  of  and  by  itself,  restrict  or  tend  to 
restrict  interstate  commerce,  and  especially  so  when  the  man- 
agement of  the  seven  continues  as  before. 

Therefore  and  necessarily  the  mere  fact  of  such  change 
cannot  be  of  itself  an  offense  against  the  Sherman  Act. 

(g)      The  Court  below  had  already  held  that  the  seven 
defendants  were  in  management  and    control    of   the    trust 
properties  after  the  conveyance  of  1899  as  they  were  before. 
The  words  are : 

"they  still  hold  the  actual  control  and  direction  of  the 
Standard  Company,  and  of  its  subsidiary  corporations,, 
and  that  since  1899  they  have  been  and  still  are  engaged 
in  carrying  into  effect  and  executing  that  trust."  (Rec. 
A,  p.  577). 

Well  if  so  they  arranged  prices,  etc.,  the  same  after- 
wards as  before,  they  just  as  easily,  just  as  readily,  but 
perhaps  a  little  more  economically,  arranged  details  after- 
wards as  before. 


But  the  plain  answer  to  the  whole  proposition  is : 

(1)      The  Sherman  Act  does  not  pretend  to  dic- 
tate how  one  shall  hold  his  real  and  personal  property, 


—72— 

and  if  it  did,  directly  collides  with  Kidd  vs.  Pearson 
(128  U.  S.  1)  E.G.  Knight  #  Company,  (156  U.  S.  1) 
and  the  Northern  Securities  Case.  (193  U.  S.  197). 

(2)  The  transfer  of  the  property  in  1899  to  the 
New  Jersey  Standard  Oil  Company  was  not  of  itself 
an  interference  with  or  a  restriction  of  interstate  com- 
merce, nor  did  it  give  to  the  Standard  Oil  Company  a 
"power  to  so  restrict.  It  still  left  all  the  property  under 
the  control  of  the  same  seven  who  controlled  it  before, 
and  as  the  Court  below  assumed  that  under  the  Trust 
Agreement  of  1882  and  such  control  of  the  seven  it  did 
not  violate  the  Sherman  Act,  no  more  did  it  do  so  after 
the  assignment. 


(3)      The  Securities  Case  widely  differs: 

(a)  There  the  Northern  Securities  Company  gained  a 
power  which  before  that  did  not  exist,  i.  e.,  it  prac- 
tically merged  the    two    separate    competing    rail- 
roads into  one,  and  thus  had  the  power  to  stifle 
competition. 

(b)  Before  the  conveyance  to  the  Securities  Company, 
there  were  two  independent,    actually  competing 
railroads    owned    separately  by  two  independent 
competing  groups,  which  by  the  conveyance  to  the 
Securities  Company  were  united  into  one  group. 

(c)  Before  the  conveyance,  each    individual    of    each 
group   owned   a   certain   interest   in   his   one   rail- 
road, but  after  the  conveyance  he  owned   an  in- 
terest in  both  of  the  railroads. 

(d)  Before  the  conveyance  the  interest  of  each  stock- 
holder in  his  own  separate   railroad  led   him  to 
favor  competition  with  the  other  railroad,  whereas 
after  the  conveyance  he  had  no  such  interest. 


—73— 

(e)  Before  the  transfer  each  stockholder  of,  say,  the 
Northern  Pacific  owned  his  shares  as  one  in  a  body 
of,  say,  one  thousand  stockholders ;  after  the  trans- 
fer he  was  one  of  a  body  of,  say,  two  thousand 
shareholders  in  a  new  and  distinct  corporation. 


Thus  the  status  of  each  railroad  and  each  stock- 
holder was  radically  changed. 

Whereas  in  the  case  at  bar : 

Before  the  conveyance  of  1899  to  the  New 
Jersey  Standard  Oil  Company  all  the  property 
conveyed  to  that  Company  was  managed  and  con- 
trolled by  the  identical  seven  men  with  the  same 
powers,  who  after  the  conveyance  still  controlled, 
just  as  before.  They  gained  no  additional  power 
by  the  transfer.  The  Standard  Oil  Company 
gained  no  additional  power  that  the  Trustees  did 
not  have  prior  to  that  transfer.  The  individuals 
who  through  trust  certificates  before  the  transfer 
owned  proportionately  all  the  property,  after  the 
transfer,  through  stock  of  the  Standard  Oil  Com- 
pany, still  owned  the  same  property  in  the  same 
proportions.  No  one  gained  an  interest  in  any 
other  property  than  that  he  had  before  the  transfer. 

Before  the  transfer  the  trust  certificate  hold- 
ers numbered,  say,  5,000,  and  after  the  transfer 
they  still  numbered  the  same. 

Before  the  transfer  the  nine  Trustees  held  and 
the  seven  defendants  managed  a  group  of  non- 
competitive  properties.  Each  certificate  holder 
then  owned  and  had  a  common  interest  in  each 
one  of  the  group.  As  such  joint  owners  they  were 
not  bound  to  split  up  the  one  united  group  into  dis- 


—74— 

tinct  competitive  groups.  They  might  lawfully 
hold  and  operate  the  whole  group  as  a  unit.  These 
certificate  holders  owned  the  one  united  group 
after  the  transfer  as  before.  It  was  non-competi- 
tive before  the  transfer.  It  remained  so  after- 
wards. The  owners  of  the  one  united  group  were 
not  morally  or  legally  bound  to  disintegrate  the 
one  united  non-competitive  group  either  before  or 
after  the  transfer. 

Thus  the  status  of  the  owners  and  of  the  properties 
with  whatever  powers  they  had>  was  not  changed  by  the 
transfer. 


The  Court  below  found  that  by  this  conveyance 
to  the  Standard  Oil  Company  in  1899  the  combination  of 
1879,  1882,  1899  was  the  more  easily  and  readily  enabled 
after  1899  to  fix  prices  at  which  it  would  sell;  to  fix  its 
rates  of  transportation  and  to  arrange  the  infinite  details 
of  its  enormous  business.  It  became  more  stable  and  in  a 
word  better  equipped  for  a  competitive  business  life. 

But  this  is  hardly  correct. 


As  to  durability: 

Under  the  Trust  Agreement  of  1882,  the  duration  was 
for  nine  lives  and  twenty-one  years  at  least,  and  probably,  by 
new  appointees,  more. 


75— 


As  to  stability: 

According  to  the  findings  of  the  Court  below,  this 
identical  business  has  been  in  charge  and  control  of  the  seven 
individual  defendants  from  18 79,  and  even  after  the  assign- 
ment of  1899  to  the  New  Jersey  Standard  Oil  Company, 
that  company  was  still  under  control  of  these  seven  ap- 
pellants. 


As  to  power: 

The  seven  through  the  nine  trustees  had  a  greater  power 
than  did  the  Standard  Oil  Company  of  New  Jersey. 


But  even  if  it  was  true  this  does  not  violate  the  Sher- 
man Act.  That  Act  was  passed  to  enlarge  and  increase 
the  fields  of  competition,  to  promote  competition,  increase 
trade.  Only  combinations  which  restricted  competition  are 
forbidden  by  the  Sherman  Act,  and  the  fact  of  a  trader  pre- 
paring himself  to  do  a  larger  business  and  to  more  effectively 
compete  could  hardly  be  seriously  claimed  to  be  a  restriction 
of  competition. 


-76- 


See  the  opinions  of  Judge  Sanborn,  in  Whit  well  vs.  The 
Tobacco  Co.,  125  Fed.  Rep.,  454,  and  Phillips  vs.  lola  Port- 
land Cement  Co.,  125  Fed.,  593,  594,  quoted  at  length  on 
pp.  172  to  175. 

In  his  opinion  in  this  case  the  learned  Judge  reiterated 
these  views.  (See  Rec.  A,  pp.  573-581). 


But  the  Court  below  further  said  that  after  the 
conveyance  in  1899,  the  seven,  through  the  Standard  Oil 
Company  of  New  Jersey,  prevented  competition  between  the 
parcels  of  properties  which  made  up  one  united  group. 

The  Court  admits  the  group  itself  was  not  objectionable; 
that  the  mere  size  of  the  group  was  not  forbidden. 


But  because  the  separate  items  which  composed  the 
group  were  not  made  by  their  owners  to  compete  with  others 
of  the  group,  this  violated  the  Sherman  Act. 

The  absence  of  competition  inside  the  group  was  just 
the  same  before  1899  as  after;  then  why  does  the  Court  hold 
one  legal  and  the  other  illegal  ? 


But  were  the  owners  of  the  group  bound  to  split  them 
up  into  competing  groups?  Where  does  the  Sherman  Act 
so  provide?  What  case  so  rules? 


—77— 

If  one  man  owned  all  of  the  group,  he  could  not  com- 
pete with  himself. 

As  ail  the  owners  of  the  one  group  owned  jointly  all 
the  group,  how  could  they,  by  splitting  up  the  group,  com- 
pete with  themselves  now  as  owners  of  this  group  against 
tBemselves  as  owners  of  another  group  ? 

Need  I  elaborate? 


According  to  the  Court  below,  nothing  brought  us 
under  the  Sherman  Act  except  the  transfer  of  1899  and 
the  future  operations  under  it. 

Not  only  did  the  Court  directly  place  its  conclusions  on 
acts  done  after  1890  (not  before  but  after)  and  turn  its 
back  on  and  eliminated  all  acts  prior  to  1890,  but  in  its 
decree  it  did  this  latter  in  a  most  marked  manner. 

The  decree  reads: 

"That  in  and  prior  to  the  year  1899  there  were 
twenty  corporations  organized  respectively  under  the 
laws  of  various  states  engaged  in  commerce  in  petro- 
leum and  its  products,  either  among  the  states  or  in  the 
territories  or  with  foreign  nations,  and  these  corpora- 
tions held  a  majority  of  the  stock  and  controlled  the 
business  and  operations  of  many  other  corporations  en- 
gaged in  that  commerce,  that  one  of  these  corporations 
was  the  Standard  Oil  Company  of  New  Jersey,  here- 
after called  the  Standard  Company,  which  had  a  capital 
stock  of  $10,000,000,  that  since  the  year  1890  thio 
defendants  named  in  section  two  of  this  decree  have 


—78— 

entered  into  and  are  carrying  out  a  combination  or  con- 
spiracy in  pursuance  whereof  about  the  year  1899  they 
caused  the  capital  stock  of  the  Standard  Company  to 
be  increased  to  $100,000,000.00,  etc.,  etc.  *  *  *: 
that  this-  combination  or  conspiracy  is  a  combination  or 
conspiracy  in  restraint  of  trade  and  commerce  in  petro- 
leum and  its  products  among  the  several  states  in  the  ter- 
ritories and  with  foreign  nations  such  as  *  the 
(Sherman  Act)  declares  to  be  illegal." 

The  conclusion  of  Section  2  alleges  the  same  combina- 
tion is  attempting  to  monopolize 

"in  violation  of  Section  2  of  the  Anti-trust  Act." 

Here  in  the  most  marked  manner  the  Court  finds  that 
the  conspiracy  which  contravenes  the  Sherman  Act  is  one 
subsequent  to  1890.  It  is  not  influenced  or  determined  by 
any  act  done  prior  to  1890. 


Are  there  other  facts  found  in  the  opinion  upon 
which  a  decree  could  be  rested  ?  The  answer  is  No.  The 
only  thing  that  the  Court  has  found  which  might  look 
in  that  direction  is  the  following : 

The  finding  of  fact  by  the  Court  other  than  contained 
in  the  decree  starts  with  Mr.  John  D.  Rockefeller  owning 
the  refinery  in  Cleveland  in  1865,  tracing  his  course  in  con- 
nection subsequently  with  others,  and  stating  that  Rogers, 
Archbold,  Payne,  and  Pratt  joined  the  Rockefellers  and 
Flagler,  and  that  they  organized  the  Standard  Oil  Company 
of  Ohio,  and  increased  its  capital  stock  to  $3,500,000,  and 
stating  that  the  Standard  Oil  Company  of  Ohio  had  be- 
come the  owners  of— 

"more   than   forty  competitive    refineries    located     re- 
spectively in  Cleveland,  Pittsburgh,  Titusville,  Parkers- 


— 79— 

burg,  Baltimore,  Philadelphia,  Bayonne,  New  York 
Harbor,  Boston  and  other  places,  and  the  ownership  of 
the  entire  interest  or  of  a  controlling  interest  in  more 
than  thirty  companies.7' 

In  this  finding  the  Court  did  not  allege  that  these 
refineries  were  acquired  in  any  other  than  a  lawful  business 
way.  It  did  not  pretend  to  allege  that  there  was  any  con- 
spiracy to  defraud  or  conspiracy  to  cause  a  monopoly  by 
which  they  were  obtained. 

Then  comes  the  Vilas,  Keith  &  Chester  Trust  of  1879, 
and  the  Trust  of  1882,  both  of  which  are  described,  but  no 
opinion  is  passed  upon  either  by  the  Court  below.  The 
Court  did  not  declare  this  to  be  unlawful.  Then  follows  the 
recital  of  what  happened  after  the  decision  of  the  Supreme 
Court  of  Ohio  in  1892  and  the  manner  of  the  dissolution  of 
the  Trust;  and  then  the  increase  of  the  capital  stock  of  the 
Standard  Oil  Company  of  New  Jersey  and  the  conveyance 
to  it  by  the  different  parties  in  interest  of  the  same  pro- 
perties that  had  been  in  the  Trust  of  1882. 

In  a  brief  way  the  assets  and  business  of  this  Stand- 
ard Oil  Company  of  New  Jersey  are  described,  and  then  it 
is  alleged  that  the  Standard  Oil  Company  of  New  Jersey 
"is  using  the  power  to  prevent  competition  between  the 
companies  it  controls  between  its  subsidiary 

companies,  and  between  those  companies  and  itself." 

It  is  not  alleged  that  the  Standard  Oil  Company  has 
the  power  or  is  exercising  it  to  prevent  competition  among 
outside  companies,  or  with  outside  companies,  or  that  it 
is  using  illegal  means  to  acquire  a  monopoly  of  the  trade. 
It  finds  the  fact  that  the  seven  individual  appellants — 

prior  to   1879     *     *     *     combined  to  secure 

and  obtain  the  control  of  companies  competing  in  in- 


—80— 

terstate  commerce  in  oil,  and  suppress  their  competition, 
that  they  caused  the  formation  and  execution  of  the 
trusts  of  1879  and  1882,  that  they  directed  and  fol- 
lowed that  unique  method  of  distributing  the  stock  held 
in  the  latter  trust  by  which  it  was  not  distributed  to 
the  majority  of  the  stockholders  for  many  years  after 
1802,  while  they  and  their  associates  held  the  con- 
trol of  it  and  of  the  corporations  it  commanded,  that 
they  caused  the  stockholding  trust  of  1899,  and  that 
by  means  of  that  trust  they  still  hold  the  actual  con- 
trol and  direction  of  the  Standard  Oil  Company  and  of 
its  subsidiary  corporations,  and  that  since  1899  they 
have  been  and  still  are  engaged  in  carrying  into  effect 
and  executing  that  trust."  Bee.  A,  577). 

It  will  here  again  be  noticed  that  the  Court  did  not 
find  as  against  these  appellants  that  they  had  been  guilty 
of  any  fraud  or  unlawful  conduct.  The  court  did  not 
use  the  word  conspire,  but  only  used  the  word  combine,  as 
to  the  co-operation  prior  to  1879.  The  combination  prior  to 
1879  and  even  now  of  several  private  traders — 

"to  secure  and  obtain  the  control  of  companies  com- 
peting in  interstate  commerce  in  oil  and  suppress  their 
competition/' 

was  and  is  perfectly  legitimate  and  proper  if  it  was  done 
by  lawful  means.  The  Court  does  not  find  that  it  was  done  by 
unlawful  means. 

Webster  defines  combine: 

"To  form  a  union — to  agree — to  coalesce." 

He  defines  conspiracy: 

"A  combination  of  men  for  evil  purpose — an  agree- 
ment between  two  or  more  persons  to  commit  a  crime  in 
concert." 


—81— 

All  the  charges  in  the  bill  that  this  combination  was 
fraudulent  and  that,  through  unlawful  rebates  and  by  unlaw- 
ful control  of  railroads  and  by  various  and  divers  unlawful 
acts,  it  acquired  a  control  of  these  refineries,  are  disallowed  by 
the  Court.  The  Court  does  not  find  any  such  averments  to 
be  true.  They  were  denied  in  the  answer.  They  are  not  found 
in  the  opinion  or  decree  below,  and  in  this  court  the  action 
of  the  Court  below  is  conclusive  because  the  Government  saw 
fit  not  to  appeal  therefrom. 

So  if  the  position  which  we  have  hereinbefore  argued 
be  correct  that  the  Court  erred  in  holding  that  the  transfer 
to  the  Standard  Oil  Company  of  New  Jersey  in  1899  was 
a  violation  of  the  Sherman  Act,  then  there  is  nothing  else 
in  the  findings  of  fact  or  in  the  decree  of  the  Court  which 
would  justify  a  decree  against  the  appellants. 


—82— 

III. 
DECREE. 

(I)  THE  COURT  ERRED,  FOR  THE  REA- 
SONS HEREINAFTER  GIVEN,  IN  ENTERING 
THE  DECREE  IT  DID. 

(i)  The  decree  authorized  by  the  Sherman  Act  is 
one  that  merely  enjoins — stops  an  illegal  thing  in  opera- 
tion when  the  petition  is  filed  or  which  then  is  forseen. 

It  is  wholly  negative. 

The  fourth  section  of  the  Sherman  Act  gives  the 
Federal  Courts  power  "to  prevent  and  restrain  violations 
of  the  act."  The  only  jurisdiction  given  is  to  stop  some- 
thing going  on — something  being  done  when  the  petition  is 
filed. 

That  section  reads: 

"The  several  circuit  courts  of  the  United  States 
are  hereby  invested  with  jurisdiction  to  prevent  and 
restrain  violations  of  this  act;  and  it  shall  be  the  duty 
of  the  several  district  attorneys  of  the  United  States, 
in  their  respective  districts,  under  the  direction  of  the 
Attorney-General,  to  institute  proceedings  in  equity 
to  prevent  and  restrain  such  violations.  Such  proceed- 
ings may  be  by  way  of  petition  setting  forth  the  case 
and  praying  that  such  violation  shall  be  enjoined  or 
otherwise  prohibited.  When  the  parties  complained  of 
shall  have  been  duly  notified  of  such  petition  the 
court  shall  proceed,  as  soon  as  may  be,  to  the  hearing 
and  determination  of  the  case;  and  pending  such  peti- 
tion and  before  final  decree  the  court  may  at  any 


time  make   such  temporary  restraining  order  or  pro- 
hibition as  shall  be  deemed  just  in  the  premises.7' 

Primarily  "to  prevent"  means  to  hinder  something  that 
hereafter  is  to  take  place;  the  word  "restrain'  bears  its 
own  plain  meaning  of  pulling  back  that  which  is  in  actual 
motion ;  which  is  then  being  done. 

So  when  you  say  that  a  court  may  prevent  and  restrain 
you  necessarily  consider  only  and  restrict  yourself  to  the 
present  and  the  future.  You  cannot  either  prevent  or  re- 
strain a  thing  that  was  done  twenty  or  one  year  ago ;  you  can 
prevent  and  restrain  that  which  is  now  in  operation  and  con- 
tinuing, but  It  is  simply  impossible  to  prevent  and  restrain 
that  which  has  been  done. 


This  Court  said  in  Lacassagne  vs.  Chapuis,  144  U.  S., 
124: 

"The  function  of  an  injunction  is  to  afford  pre- 
ventive relief,  not  to  redress  alleged  wrongs  which  have 
been  committed  already." 


Not  only  do  these  words  prevent  and  restrain  demon- 
strate this,  but  the  same  section  adds  that  proceedings  to 
enforce  the  Act  may  be  by  way  of 

"petition  setting  forth  the  case  and  praying  that  such 
violation   shall  be   enjoined  or  otherwise   prohibited;" 
and  then  it  adds  that  the  courts  may 

"make  such  temporary  restraining  order  or  prohibition 
as  shall  be  deemed  just  in  the  premises." 


—84— 

Twice  the  expression  is  "prevent  and  restrain;"  then 
the  word  "enjoin;"  then  the  phrase  "restraining  order"  and 
the  word  "prohibited"  and  "prohibition."  Each  one  of  these 
can  only  mean  to  give  jurisdiction  over  a  present  continu- 
ing or  then  foreseen  violation  of  the  Act. 

Every  word  is  prospective;  not  one  retrospective. 

Besides,  the  Act  itself  clearly  shows  two  remedies  given 
for  the  misdemeanor;  the  one  is  the  ordinary  criminal 
remedy  to  punish  for  what  has  been  done,  and  the  other 
is  the  extraordinary  and  unusual  remedy  of  preventing  and 
restraining  the  commission  of  a  misdemeanor  now  in  action 
and  being  done  which  is  a  violation  of  the  Act, 

In  the  Knight  &  Company  Case,  Fuller,  C.  J.  (156  U. 
S.  17),  said  that  the  Sherman  Act 

"only  authorized  the  Circuit  Courts  to  proceed  by  way 
of  preventing  and  restraining  violations  of  the  Act 
in  respect  of  contracts,  combinations  or  conspiracies  in 
restraint  of  interstate  or  international  trade  or  com- 


Harriman  vs.  Northern  Securities  Company,  197  U.  S. 
244,  289,  Fuller,  C.  J.,  quoted  with  approval  the  comment  of 
Judge  Thayer  on  the  decree  in  the  latter' s  opinion  in  128 
Fed.  808: 

"The  decree  was  wholly  prohibitory.     It  enjoined 
the    doing   of   certain   threatened    acts.  In   its 

bill  of  complaint  the  United  States  prayed,  among  ather 
things,  for  a  mandatory  injunction  against  the  Securi- 
ties Company,  requiring  it  to  recall  and  cancel  the 
certificates  of  stock  which  it  had  used,  and  to  surrender 
the  stock  of  the  two  railway  companies  in  exchange  for 
which  its  stock  had  been  issued.  This  prayer  for  relief 
was  denied/' 


—85— 

Swift  &  Co.  vs.   United  States,  196  U.  S.,  375,  402, 
Holmes,  J.,  said  the  decree  issued 

'''restrains  such  combinations  only  to  the  extent  of  cer- 
tain specified  devices  which  the  defendants  are  alleged 
to  have  used  and  intend  to  continue  to  use." 


The  Sherman  Act  prescribes  certain  specific  meth- 
ods of  relief  which  are  exclusive  of  all  others. 


Noyes  on  Intercorporate  Relations  (2nd  Ed.  of  1909) 
Sec.  406,  says  of  the  Sherman  Act: 

"The  statute,  being  penal  in  its  nature,  must  be 
strictly  construed.  It  imposes  new  liabilities  and  pro- 
vides particular  modes  of  redress,  both  for  the  public 
and  the  individual,  and  the  methods  so  prescribed  are 
exclusive." 


Greer,  Mills  &  Co.  vs.  Stoller,  77  Fed.  1,  3 : 
"The  statute,  being  highly  penal  in  its  character, 
must  be  strictly  construed;  and,  having  created  a  new 
offense,  and  imposed  new  liabilities,  and  having  pro- 
vided the  modes  of  redress  to  the  public  and  the  private 
citizen,  by  established  rules  of  construction,  these  reme- 
dies are  exclusive  of  all  others." 

In  Minnesota  vs.  Northern  Securities  Co.  194,  II.   S. 

48,  71,  Mr.  Justice  Harlan  in  holding  that  a  state  could  not 

file  a  bill  in  equity  under  section  four,  said: 

"Congress  has  prescribed  a  specific  mode  for  pre- 
venting restraints  on  it  (interstate  commerce.)" 


—86— 

Barnet  vs.  National  Bank,  98  U.  S.,  555.  558. 

"Where  a  statute  creates  a  new  right  or  offense, 
and  provides  a  specific  remedy  or  punishment,  they  alone 
apply.  Such  provisions  are  exclusive." 

East  Tennessee,  etc.  R.  Co.  vs.  Southern  Telegraph  Co. 
112  U.  S.,  306,  310. 

"The  remedy  is  statutory  only,  and  every  court 
which  takes  jurisdiction  for  its  enforcement  is  limited 
in  its  powers  by  the  statute  under  which  alone  it  can 
act." 

Farmers'  &  Mechanics'  Nat.  Bank  vs.  Dearing,  91  II. 
S.,  29,  35. 

"Where  a  statute  creates  a  new  offense  and  de- 
nounces the  penalty,  or  gives  a  new  right  and  declares 
the  remedy,  the  punishment  or  remedy  can  be  only  that 
which  the  statute  prescribes." 

United  States  vs.  Union  Pacific  Railroad  Company, 
98  U.  S.,  569. 

An  Act  of  Congress  directed  the  Attorney-General  to 
institute  a  suit  in  equity  in  the  name  of  the  United  States 
against  the  ^TJnion  Pacific  Railroad  Company,  and  all  per- 
sons who  had  received  stock  in  it  without  paying  full  value, 
or  profits  from  construction  contracts  or  bonds  or  lands, 
which  should  have  been  accounted  for  to  the  company.  .  The 
purpose  of  the  bill  was  for  discovery,  etc.,  and  the  restoration 
to  the  company  of  such  moneys  and  property. 

The  Supreme  Court  sustained  a  demurrer  to  the  bill  on 
the  ground,  among  others,  that  the  relief  asked  was  not 
within  the  terms  of  the  act. 


—87— 

Mr.  Justice  Miller  said  that  it  was — 

"clear  that   any  bill  brought  by  the  Attorney-General 

under  the  fourth  section  of  the  act  of  1873  must  be 

limited  by  the  provisions  of  that  act,  both  as  to  the 

grievances  on  which  it  counts  and  the  relief  which  it 

seeks." 


Mr.  Justice  Miller  further  said: 

"Congress  might  also  have  directed  the  Attorney- 
General,  either  as  part  of  this  proceeding  or  as  an 
independent  one,  to  ask  the  court  to  declare  the  fran- 
chises of  the  company  forfeited.  It  might  have  order- 
ed a  bill  to  inquire  if  the  company  was  insolvent,  and 
if  so,  to  wind  up  its  affairs  and  distribute  its  assets. 
In  short,  there  are  many  modes  in  which  the  legislature 
could  have  called  into  operation  all  the  judicial  powers 
known  to  the  law.  But  it  has  not  done  so,  and  that  is 
the  constantly  recurring  answer  to  this  bill.  It  pro- 
vided in  the  statute  for  a  mode  of  securing  a  full  in- 
quiry into  the  affairs  of  the  company,  by  enacting  that 
the  Secretary  of  the  Treasury  should  have  free  access 
to  all  its  books  and  correspondence, — a  mode  of  ob- 
taining information  far  more  effective  than  a  bill  of 
discovery.  The  statute,  therefore,  did  not  authorize  a 
bill  of  discovery.  *  *  *  *  It  limited  the  re- 

lief to  be  granted  under  this  act,  therefore,  both  by  the 
terms  in  which  it  was  granted  and  by  other  provisions, 
to  the  recovery  of  a  moneyed  decree,  or  a  restoration 
of  specific  property  to  which  the  United  States  or  the 
company  was  by  law  entitled." 


-S8— 


The  decrees  that  have  been  made  under  the  Sher- 
man Act. 


In  Northern  Securities  Co.  vs.  United  States,  193  U. 

S.,  197,  255,  the  Supreme  Court  affirmed  the  decree  of  the 

Circuit  Court,  which  was  as  follows: 

"That  the  Northern  Securities  Company,  its  of- 
ficers, agents,  servants  and  employes  be  and  they  are 
hereby  enjoined  from  acquiring  or  attempting  to  ac- 
quire further  stock  of  either  of  the  aforesaid  railway 
companies. 

That  the  Northern  Securities  Company  be  enjoined 
from  voting  the  aforesaid  stock  which  it  now  holds  or 
may  acquire,  and  from  attempting  to  vote  it,  at  any 
meeting  of  the  stockholders  of  either  of  the  aforesaid 
railway  companies  and  from  exercising  or  attempting 
to  exercise  any  control,  direction,  supervision  or  in- 
fluence whatsoever  over  the  acts  and  doings  of  said  rail- 
way companies  or  either  of  them  by  virtue  of  its  hold- 
ing such  stock  therein. 

That  the  Northern  Pacific  Railway  Company  and 
the  Great  Northern  Railway  Company,  their  officers 
directors,  servants  and  agents  be  and  they  are  hereby 
respectively  and  collectively  enjoined  from  permitting 
the  stock  aforesaid  to  be  voted  by  the  Northern  Securi- 
ties Company,  or  in  its  behalf,  by  its  attorneys  or  agents 
at  any  corporate  election  for  directors  or  officers  of  either 
of  the  aforesaid  railway  companies. 

And  that  they,  together  with  their  officers,  di- 
rectors, servants  and  agents,  be  likewise  enjoined  and 
specitively  restrained  from  paying  any  dividends  to 
the  Northern  Securities  Company  on  account  of  stock 
in  either  of  the  aforesaid  railways  companies  which  it 
now  claims  to  own  and  hold. 


—89— 

And  that  the  aforesaid  railway  companies,  their 
officers,  directors,  servants  and  agents,  be  enjoined  from 
permitting  or  suffering  the  Northern  Securities  Com- 
pany or  any  of  its  officers  or  agents,  as  such  officers  or 
agents,  to  exercise  any  control  whatsoever  over  the  cor- 
porate acts  of  either  of  the  aforesaid  railway  companies. 

But  nothing  herein  contained  shall  be  construed 
as  prohibiting  the  Northern  Securities  Company  from 
returning  and  transferring  to  the  Nbrthern  Pacific  Rail- 
way Company  and  the  Great  Northern  Railway  Com- 
pany, respectively,  any  and  all  shares  of  stock  in  either 
of  said  railway  companies  which  said,  the  Northern 
Securities  Company,  may  have  heretofore  received  from 
such  stockholders  in  exchange  for  its  own  stock;  and 
nothing  herein  contained  shall  be  construed  as  pro- 
hibiting the  Northern  Securities  Company  from  making 
such  transfer  and  assignments  of  the  stock  aforesaid  to 
such  person  or  persons  as  may  now  be  holders  and  owners 
of  its  own  stock  originally  issued  in  exchange  or  in 
payment  for  the  stock  claimed  to  have  been  acquired 
by  it  in  the  aforesaid  railway  companies." 

In  the  majority  opinion  Mr.  Justice  Harlan  said: 

"The  Federal  Court  may  not  have  power  to  for- 
feit the  charter  of  the  Securities  Company;  it  may 
not  declare  how  its  shares  of  stock  may  be  transferred 
on  its  books,  nor  prohibit  it  from  acquiring  real  estate, 
nor  diminish  or  increase  its  capital  stock.  All  these 
and  like  matters  are  to  be  regulated  by  the  State  which 
created  the  company." 

From  the  report  of  Harriman  vs.  Northern  Securities 
Company,  197  II.  S.,  244,  299,  it  appears  that  the  directors 
of  the  Northern  Securities  Company  voluntarily  adopted  a 


—90— 

resolution  distributing  the   shares  of  the  Northern  Pacific 
and  Great  Northern  ratably  among  its  stockholders. 

On  page  289  Chief  Justice  Fuller  quoted  with  approval 
the  following  comment  of  Judge  Thayer  on  the  decree  in 
his  opinion  (128  Fed.  808),  refusing  the  application  of 
Harriman  et  al.  for  leave  to  intervene  after  the  Supreme 
Court  had  affirmed  the  decree: 

"The  decree  was  wholly  prohibitory.  It  enjoined 
the  doing  of  certain  threatened  acts.  ***** 
In  its  bill  of  complaint  the  United  States  prayed,  among 
other  things,  for  a  mandatory  injunction  against  the 
Securities  Company  requiring  it  to  recall  and  cancel 
the  certificates  of  stock  which  it  had  issued,  and  to  sur- 
render the  stock  of  the  two  railway  companies  in  ex- 
change for  which  its  stock  had  been  issued.  This  prayer 
for  relief  was  denied.  The  Government  was  satisfied 
with  the  relief  obtained,  and  expresses  itself  as  fully 
satisfied  therewith  at  the  present  time." 

Swift  <&  Company  vs.   United  States,  196  IT.  S.,  375. 

The  Supreme  Court  affirmed  the  decree  of  the  Circuit 
Court,  making  perpetual  a  preliminary  injunction.  The 
injunction  as  modified  by  the  Supreme  Court,  included  com- 
bining to  obtain  rebates  from  common  carriers,  and  was  as 
follows : 

"1.  And  now,  upon  motion  of  the  said  attorney, 
the  court  doth  order  that  the  preliminary  injunction 
heretofore  awarded  in  this  case,  to  restrain  the  said  de- 
fendants, and  each  of  them,  their  respective  agents 
and  attorneys,  and  all  other  persons  acting  in  their  be- 
half, or  in  behalf  of  either  of  them,  or  claiming  so  to 
act,  from  entering  into,  taking  part  in,  or  performing 
any  contract,  combination  or  conspiracy,  the  purpose 
or  effect  of  which  will  be,  as  to  trade  and  commerce  in 


—91— 

fresh  meats  between  the  several  States  and  Territories 
and  the  District  of  Columbia,  a  restraint  of  trade,  in 
violation  of  the  provisions  of  the  act  of  Congress  ap- 
proved July  2nd,  1890,  entitled  'An  Act  to  protect 
trade  and  commerce  against  unlawful  restraints  and 
monopolies,'  either  by  directing  or  requiring  their  re- 
spective agents  to  refrain  from  bidding  against  each 
other  in  the  purchase  of  live  stock;  or  collusively  and 
by  agreement  to  refrain  from  bidding  against  each  other 
at  the  sales  of  live  stock ;  or  by  combination,  conspiracy 
or  contract  raising  or  lowering  prices  or  fixing  uniform 
prices  at  which  the  said  meats  will  be  sold,  either  di- 
rectly or  through  their  respective  agents;  or  by  cur- 
tailing the  quantity  of  such  meats  shipped  to  such 
markets  and  agents ;  or  by  establishing  and  maintaining 
rules  for  the  giving  of  credit  to  dealers  in  such  meats 
*as  charged  in  the  bill,  the  effect  of  which  rules  will 
be  to  restrict  competition ;  or  by  imposing  uniform  charges 
for  cart-age  and  delivery  of  such  meats  to  dealers  and  con- 
sumers as  charged  in  the  bill,  the  effect  of  which 
will  be  to  restrict  competition ;  f  [or  by  any  other  method 
or  device,  the  purpose  and  effect  of  which  is  to  restrain 
commerce  as  aforesaid,]  and  also  from  violating  the  pro- 
visions of  the  Act  of  Congress  approved  July  2,  1890, 
entitled  'An  Act  to  protect  trade  and  commerce  against 
unlawful  restraints  and  monopolies,7  by  combining  or 
conspiring  together,  or  with  each  other  and  others,  to 
monopolize  or  attempt  to  monopolize  any  part  of  trade 
and  commerce  in  fresh  meats  among  the  several  States 
and  Territories  and  the  District  of  Columbia,  by  de- 
manding, obtaining,  or,  with  or  without  the  connivance 
of  the  officers  or  agents  thereof,  or  of  any  of  them, 
receiving  from  railroad  companies  or  other  common  car- 


*Words  in  heavy  type  inserted  by  Supreme  Court. 
fWords  in  brackets  stricken  out  by  Supreme  Court. 


—92— 

riers  transporting  such  fresh  meats  in  such  trade  or  com- 
merce, either  directly  or  by  means  of  rebates,  or  by  any 
other  device,  transportation  of  or  for  such  means,  from 
the  points  of  the  preparation  and  production  of  the  same 
from  live  stock  or  elsewhere,  to  the  markets  for  the  sale 
of  the  same  to  dealers  and  consumers  in  other  States  and 
Territories  than  those  wherein  the  same  are  so  prepared, 
or  the  District  of  Columbia,  at  less  than  the  regular 
rates  which  may  be  established  or  in  force  on  their  sev- 
eral lines  of  transportation,  under  the  provisions  in  that 
behalf  of  the  laws  of  the  said  United  States  for  the  regu- 
lation of  commerce,  be  and  the  same  is  hereby  made  per- 
petual." 

The  decree,  as  Mr.  Justice  Holmes  said  (p.  402),  "re- 
strains such  combinations  only  to  the  extent  of  certain 
specified  devices,  which  defendants  are  alleged  to  have 
used  and  intend  to  continue  to  use." 

United  States  vs.  Chesapeake  &  Ohio  Fuel  Co.,  105  Fed. 
93: 

The  defendants  were  the  members  of  an  association  of 
coal  producers,  and  a  fuel  company,  who  had  made  a  con- 
tract by  which  the  fuel  company  agreed  to  sell  all  the  coal  of 
the  members  of  the  association  at  prices  to  be  fixed  by  a  com- 
mittee of  the  association,  and  to  account  to  the  association  for 
the  same.  The  decree  was  that  the  defendants 

it*  *  #  kg  enj0ined  from  selling  or  shipping  under 
this  contract  coal  or  coke  into  any  state  other  than  the 
state  in  wrhich  they  reside,  and  the  contract,  in  so  far 
as  it  affects  interstate  trade  and  commerce,  is  declared 
to  be  void  and  illegal,  and  the  combination  of  the  de- 
fendants thereunder  will  be  dissolved." 

The  decree  was  affirmed  by  the  Circuit  Court  of  Ap- 
peals in  115  Fed.  610. 


—93— 

New  Haven  Railroad  Company  vs.  Interstate  Commerce 
Commission,  200  U.  S.  361,  404. 


Interstate  Commerce  Commission  filed  a  bill  in  equity 
alleging  that  the  Chesapeake  &  Ohio  Railway  Company  was 
purchasing  and  transporting  and  selling  coal  at  a  price  per 
ton  which,  after  deducting  the  cost  of  purchase  and  the  cost 
of  delivery,  amounted  to  less  than  the  published  freight  rate 
for  coal. 

The  Supreme  Court  held  that  these  acts  amounted  to  an 
undue  preference  in  violation  of    the  Interstate  Commerce 
Act.     That  Court,  however,  limited  the  injunction  granted 
to  the  specific  offense  charged  and  the  relief  took  the  form  of 
"perpetually  enjoining  the  Chesapeake  &  Ohio  from  tak- 
ing less  than  the  rates  fixed  in  its  published  tariff  of 
freight  rates,  ~by  means  of  dealing  in  the  purchase  and 
sale  of  coal." 

The  Interstate  Commerce  Commission  had  taken  a  cross 
appeal  in  this  case,  claiming  that  the  Court 

"should  have  further  enjoined  and  restrained  the  Chesa- 
peake and  Ohio  Railway  Company  from  giving  to  said 
railroad  company,  or  to  any  other  person,  firm,  or  com- 
pany, any  undue  or  unreasonable  advantage  or  prefer- 
ence, and  should  further  have  restrained  and  enjoined 
the  Chesapeake  and  Ohio  Railway  Company  from  trans- 
porting coal  from  one  State  to  or  through  any  other  State 
for  the  New  York,  New  Haven  and  Hartford  Railroad 
Company,  or  for  any  firm,  person  or  company,  at  a  less 
rate  than  the  duly  established  freight  rate  of  the  said 
railway  company  in  force  at  the  time,  and  from  further 
failing  to  observe  its  published  tariffs,  or  from  giving 


—94— 

to  the  said  New  York,  New  Haven  and  Hartford  Kail- 
road  Company,  or  to  any  person,  firm,  or  company,  in 
any  manner  whatsoever,  any  undue  or  unreasonable 
preference  or  advantage." 

The  Supreme  Court  refused  this  form  of  decree,  and, 
in  its  opinion,  Mr.  Justice  White  said : 

"The  contention,  therefore,  is  that  whenever  a  car- 
rier has  been  adjudged  to  have  violated  the  act  to  regu- 
late commerce  in  any  particular  it  is  the  duty  of  the 
court,  not  only  to  enjoin  the  carrier  from  further  like 
violations  of  the  act,  but  to  command  it  in  general  terms 
not  to  violate  the  act  in  the  future  in  any  particular. 
In  other  words,  the  proposition  is  that  ~by  the  effect  of  a 
judgment  against  a  carrier  concerning  a  specific  viola- 
tion of  the  act,  the  carrier  ceases  to  be  under  the  protec- 
tion of  the  law  of  the  land  and  must  thereafter  conduct 
all  its  business  under  the  jeopardy  of  punishment  for 
contempt  for  violating  a  general  injunction.  To  state 
the  proposition  is,  we  think,  to  answer  it.  Swift  & 
Company  vs.  United  States,  196  U.  S.  375.  The  con- 
tention that  the  cited  case  is  inapposite  because  it  did 
not  concern  the  act  to  regulate  commerce,  but  involved  a 
violation  of  the  anti-trust  act,  we  think  is  also  answered 
by  the  mere  statement  of  the  proposition.  The  require- 
ment of  the  act  to  regulate  commerce  that  a  court  shall 
enforce  an  observance  of  the  statute  against  a  carrier 
who  has  been  adjudged  to  have  violated  its  provisions, 
in  no  way  gives  countenance  to  the  assumption  that  Con- 
gress intended  that  a  court  should  issue  an  injunction 
of  such  a  general  character  as  would  be  violative  of  the 
most  elementary  principles  of  justice.  The  injunction 
which  was  granted  in  the  case  of  In  re  Debs,  158  U.  S. 
564,  was  not  open  to  such  an  objection,  as  its  terms  were 


—95— 

no  broader  than  the  conspiracy  which  it  was  the  purpose 
of  the  proceeding  to  restrain.  To  accede  to  the  doctrine 
relied  upon  would  compel  us,  under  the  guise  of  protect- 
ing freedom  of  commerce,  to  announce  a  rule  which 
would  be  destructive  of  the  fundamental  liberties  of  the 
citizen." 


The  Tobacco  case  is  now  before  and  so  recently  argued 
in  this  court  that  it  need  not  be  cited  at  length.  In  that  case 
for  the  first  time  under  the  Sherman  Act,  all  participation  in 
inter-state  commerce  was  enjoined. 


(2)  The  decree  itself  must  be  plain,  defining  ex- 
actly the  things  which  the  appellants  are  prohibited 
from  doing. 

The  Supreme  Court  of  the  United  States  in  Swift  & 
Company  vs.  United  States,  196  U.  S.,  375,  396,  402;  in  con- 
sidering the  decree  of  the  court  below  in  the  above  case,  said : 
"We  equally  are  bound  by  the  first  principles  of 
justice  not  to  sanction  a  decree  so  vague  as  to  put  the 
whole  conduct  of  the  defendants'  business  at  the  peril 
of  a  summons  for  contempt.     We  cannot  issue  a  gen- 
eral injunction  against  all  possible  breaches  of  the  law. 
So  modified,  it   (the  decree)   restrains  such 
combination  only  to  the  extent  of  certain  specified  de- 
vices which  the  defendants  are  alleged  to  have  used  and 
intend  to  continue  to  use." 


In  the  Addyston  Pipe  Case,  175  U.  S.  247,  the  decree 
below  was  also  modified  and  made  more  specific. 


—96— 

Lyon  vs.  Botchford,  25  Hun.  (N.  Y.),  57: 

"It  seems  to  us  that  the  injunction  order,  at  least  in 
those  two  particulars,  exceeded  the  office  of  an  injunc- 
tion, which  should  show  upon  its  face  all  those  things 
which  it  is  necessary  for  the  defendant  to  know  in  order 
to  obey  it,  and  should  plainly  indicate  to  the  defendant 
specifically  all  the  acts  which  he  is  thereby  restrained 
from  doing  without  calling  upon  him  for  inferences,  or 
any  conclusions  only  to  be  arrived  at  by  a  more  or  less 
uncertain  process  of  reasoning,  and  about  which  the 
parties  might  well  differ  in  opinion  either  as  to  the  facts 
or  law.  The  act  prohibited  must  be  the  doing  of  some 
tangible  or  distinct  thing,  or  series  of  things,  to  be 
clearly  pointed  out  and  described.  An  in- 

junction should  in  itself  contain  sufficient  to  apprise  the 
party  what  he  is  restrained  from  doing  without  resorting 
to  the  bill  on  file.  (Sullivan  vs.  Judah,  4  Paige,  444). 
Its  language  should  be  so  clear  that  an  unlearned  man 
can  understand  it  without  employing  counsel.  (Laurie 
vs.  Laurie,  9  Paige,  234;  Moat  vs.  Holbein,  2  Edw., 
188).  It  should  be  so  expressed  that  defendants  may 
distinctly  understand  what  is  prohibited.  (Clark  vs. 
Clark,  25  Barb.,  76)." 

Laurie  vs.  Laurie,  9  Paige,  234: 

Chancellor  Wai  worth: 

"As  the  defendant  is  bound  to  obey  the  process  of 
the  court  at  his  peril,  the  language  of  the  injunction 
should  in  all  cases  be  so  clear  and  explicit  that  an  un- 
learned man  can  understand  its  meaning,  without  the 
necessity  of  employing  counsel  to  advise  him  what  he  has 
a  right  to  do  to  save  him  from  subjecting  himself  to 
punishment  for  a  breach  of  the  injunction.  And  the 


—97— 

language  of  the  writ  should  at  the  same  time  be  so  re- 
stricted as  not  to  deprive  him  of  any  rights  which  the 
case  made  by  the  bill  does  not  require  that  he  should  be 
restrained  from  exercising." 

Robinson  vs.  Clapp,  65  Conn.,  365,  396: 

"The  court  also  erred  in  granting  an  injunction  in 
so  indefinite  terms.  It  is  impossible  to  lay  down  any 
precise  rule  of  universal  application  upon  the  subject 
But  the  person  enjoined  is  entitled  to  know  with  reason- 
able certainty  what  acts  he  may  and  may  not  do  without 
making  himself  liable  as  in  contempt  of  an  order." 

Moat  vs.  Holbein,  2  Edw.  CL,  188 : 

Sullivan  vs.  Judoih,  4  Paige,  444. 


(3)     The  decree  of  the  Court  below   in  the   case 
at  bar. 


See  decree  at  length,  Record,  Vol.  A,  page  525. 

The  decree  is  in  nine  sections;  Section  1  recited  that 
prior  to  1899  twenty  corporations  had  been  organized  and 
engaged  in  commerce  in  petroleum,  and  further  decreed  that 
''Since  the  year  1890  the  defendants  named  in  Sec- 
tion two  of  this  decree  have  entered  into  and  are  carry- 
ing out  a  combination  or  conspiracy  in  pursuance  where- 
of about  the  year  1899  they  caused  the  capital  stock 
of  the  Standard  Company  to  be  increased  to  $100,000,- 
000.00,  caused  a  majority  of  the  stock  of  the  nineteen 
companies,  and  the  power  to  control  them,  and  to  man- 
age their  trade,  and  the  power  to  control  the  corporations 
which  they  controlled  and  to  manage  their  trade,  to  be 


—98— 

vested  in  and  held  by  the  Standard  Company  in  exchange 
for  its  stock  which  was  issued  to  the  former  holders  of 
the  stock  of  the  nineteen  companies,  and  caused  the 
Standard  Company  ever  since  to  control  all  these  cor- 
porations, hereafter  called  the  subsidiary  corporations, 
and  to  manage  their  trade  without  competition  among 
themselves  as  the  trade  and  business  of  a  single  person ; 


Such  a  combination  is  forbidden  by  the  Sherman  Act. 

Section  2 — 

Names  the  conspiring  defendants,  and  decrees  that 
"by  means  of  this  combination  the  defendants  named 
in  this  section  have  combined  and  conspired  to  monopo- 
lize, have  monopolized  and  are  continuing  to  monopolize 
a  substantial  part  of  the  commerce  among  the  states,  in 
the  territories  and  with  foreign  nations  in  violation  of 
Section  2  of  the  Anti-Trust  Act." 

Section  3 — 

Names  the  defendants  it  eliminates  from  the  decree. 


Section 

Names  the  companies  in  which  the  Standard  Oil  Com- 
pany of  New  Jersey  owns  the  whole  or  part  of  the  stock,  and 
finds  that  the  said  Standard  Oil  Company 

"controls  the  subsidiary  companies  and  directs  the  man- 
agement thereof  so  that  none  of  the  subsidiary  compan- 
ies competes  with  any  other  of  those  companies  or  with 
the  Standard  Company,  but  their  trade  is  all  managed 
as  that  of  a  single  person." 


Section   5 — • 

"That  the  stocks  of  the  various  corporations  which 
are  named  in  Section  2  and  described  in  Section  4  of 
this  decree  held  by  the  Standard  Company  were  ac- 
quired and  are  held  by  it  by  virtue  of  the  illegal  com- 
bination." 


(a)      That  the  Standard  Oil  Company  and  others 

"are  enjoined  and  prohibited  from  voting  any  of  the 
stock  in  any  of  the  subsidiary  companies  named  in  Sec- 
tion 2  of  this  decree" 

and 

"from  exercising  or  attempting  to  exercise  any  control, 
direction,  supervision  or  influence  over  the  acts  of  these 
subsidiary  companies  by  virtue  of  its  holding  of  their 
stock." 

The  subsidiary  companies  are  enjoined 

(b)  from  paying  any  dividends  to  the  Standard  Oil 
Company  on  such  stocks ; 


(c)  from  permitting  the  Standard  Oil  Company  to 
vote  stock  in  or  direct  the  policy  of  or  exercise  any  con- 
trol over  the  corporate  acts  of  such  companies 

"by  virtue  of  such  stock  or  by  virtue  of  the  power 
over  such  subsidiary  corporation  acquired  by  means 
of  the  illegal  combination," 
But 

"the  defendants  are  not  prohibited  by  this  decree 
from  distributing  ratably  to  the  stockholders  of  the 
principal  company  the  shares  to  which  they  are 
equitably  entitled  in  the  stocks  of  the  defendant 
corporations  that  are  parties  to  the  combination." 


—100— 

Section  6 — 

Defendants  named  in  Section  2  are  prohibited 

"from  continuing  or   carrying  into  further  effect  the 
combination  adjudged  illegal  hereby/' 

or 
"from  entering  into  or  forming  any  like  combination," 


Either 

(1)  by  use  of  liquidating  certificates 

"in  two  or  more  potentially  competitive  parties  to  the 
illegal  combination," 

or 

by  a  conveyance  of  the  physical  property  and  business  of 
any  one  or  more  of  the  defendants  to 

"a  potentially  competitive  party  to  this  combination," 

or 

by  placing  control  of  any  of  said  corporations  in  a  trustee 
"by  causing  its  stock  or  property  to  be  held  by  others 
than  its  equitable  owners  or  by  any  similar  device," 

or 

(2)  By  making 

"any  express  or  implied  agreement  or  arrangement  to- 
gether or  one  with  another  like  that  adjudged  illegal 
hereby  relating  to 


(a)  the  control  or  management  of  any  of  said  corpora- 
tions, 

or 

(b)  "or  the  price  or  terms  of  purchase," 

or 
"of  sale" 

or 

"the  rates  of  transportation  of  petroleum  or  its  prod- 
ucts" 


—101— 


or 

"relative  to  the  quantity  thereof  purchased,  sold,  trans- 
ported or  manufactured  by  any  of  said  corporations 
which  will  have  a  like  effect  in  restraint  of  commerce 
among  the  states,  in  the  territories  and  with  foreign 
nations  to  that  of  the  combination,  the  operation  of 
which  is  hereby  enjoined." 


Section  7 — • 

Defendants  are  prohibited 

"until  the  discontinuance  of  the  operation  of  the  illegal 
combination  from  engaging  or  continuing  in  commerce 
among  the  states  or  in  the  territories  of  the  United 
States." 


(4)     Purpose  of  decree. 

We  suppose  the  real  purpose  of  the  whole  decree  is  to 
force  a  dissolution  of  what  the  court  calls  the  combination: 
We  are  enjoined  from  continuing  it,  and  are  enjoined  from 
doing  any  interstate  trade  until  we  do  distribute  the  stocks. 

Such  distribution  can  only  be  to  the  stockholders  of  the 
Standard  Oil  Company,  each  his  pro  rata  share  of  the  stocks 
the  Standard  Oil  Co.  holds — but  the  method  of  distribution 
and  the  future  use  by  the  stockholder  of  his  shares  of  the 
stock  seems  from  the  opinion  of  the  Court  to  be  to  prevent 
two  or  more  of  such  owners  to  agree  with  each  other  as  to  the 


—102— 

future  use  of  the  same — to  prevent  the  owners  of  one  refinery 
making  any  contract  with  another  or  a  pipe  line  <>r  trading 
station  or  tank  cars  as  to  the  sale  or  quality  or  transportation 
rates  or,  indeed,  about  anything  relating  to  petroleum. 

If,  say  A,  one  stockholder  is  willing  and  offers  to  buy 
from  B.  C.  D.  their  shares,  the  decree  forbids  it. 

If  A  wants  to  get  refineries  from  the  others,  he  cannot.. 

JVo  one  of  the  stockholders  of  the  Standard  Oil  Company- 
seems  able  to  do  aught  with  the  shares  of  stock  the  Standard 
Oil  Company  will  transfer  to  him  except  to  hold  them  or  sell 
them  to  an  outsider. 

"No  one  of  the  subsidiary  corporations  may  contract  with 
any  other  subsidiary  corporation  about  the  business  of  each, 
nor  may  it  contract  with  any  stockholder. 

We  know  the  scope  of  the  injunction  is  limited  to  actions 

"which  will  have  a  LIKE  effect" 

to  that  of  the  present  combination — but  who  can  determine- 
that  in  the  complex  business,  such  as  that  of  the  present  organ- 
ized Standard  Oil  Company. 


Nature  of  Our  Organization. 

Our  case  has  no  analogy  in  decided  cases — The  Joint 
Traffic,  The  Trans-Missouri,  The  Addyston  Pipe  case  were 
all  cases  where  a  number  of  independent,  unconnected  compet- 
ing corporations  by  contract  sought  to  make  freight  rates  or- 


—103— 

fix  prices  or  regulate  sales  or  production.  Strike  down  the 
contract  and  each  corporation  thereby  assumed  the  relation  it 
had  before  the  contract. 

But  in  our  case  seven  individuals,  assisted  by  others,  buy 
a  portion  of  their  properties,  but  build  a  much  greater  portion. 
They  do  all  of  this  out  of  their  joint  funds  and  their  joint 
enterprise.  No  one  of  their  properties  is  or  does  compete 
with  any  other.  All  are  jointly  held  and  used  and  controlled 
as  one  property.  There  is  no  contract  to  fix  prices  or  regu- 
late production — or  regulate  rates  for  freight.  The  decree, 
if  carried  into  effect,  will  not,  as  in  the  Addyston  Pipe  case 
and  others,  simply  leave  scores  of  old  corporations  where  it 
found  them,  but  will  recreate  new  bodies,  now  parts  of  one 
whole,  and  now  so  used  as  to  facilitate  and  carry  out  one 
united  business. 

This  is  elaborated  supra. 

(5)  The  Sherman  Act  does  not  give  power  to  the 
Courts  to  strike  down  organized  business — or  destroy 
its  property.  If  such  had  been  its  intention,  adequate 
words  would  have  been  used  to  so  indicate.  It  is  not 
the  continuance  of  business  the  courts  may  prevent,  but 
solely  and  only 

"violations  of  this  Act." 


If  the  facts  show  that  the  existing  organization  can 
legally  continue  without  violating  the  Sherman  Act,  the  court 
cannot  destroy  it,  but  only  prevent  it  in  the  future  doing  un- 
lawful acts.  As,  for  example,  seven  (7)  men  by  grouping 
100  parcels  of  property,  pipe  lines,  refineries,  ships,  etc.,  into 
one  non-competitive  group,  own  the  group  and  may  lawfully 
own  it.  Suppose  they  did  not  use  the  group  to 


—104— 

make  a  product,  but  held  it  for  sale  for  future  rise  in  price; 
evidently  the  fact  of  the  existence  of  that  group  does  not  per 
se  violate  the  Sherman  Act — because  it  takes  no  part  in  inter- 
state commerce.  Evidently  then  it  is  the  use  of  the  group 
that  creates  that  which  goes  into  inter-state  commerce,  and  not 
the  ownership  of  it.  But  the  handling  of  the  group's  product 
in  interstate  commerce  may  be  legitimate  or  it  may  be  ille- 
gitimate. The  mere  putting  of  the  product  itself  openly  and 
fairly  in  the  market — putting  it  up  as  it  were  at  auction, 
and  selling  it  to  the  highest  bidder  in  inter-state  commerce, 
would  not  violate  the  Sherman  Act.  Therefore  the  group 
itself  and  the  legitimate  use  of  its  product  does  not  violate 
the  Sherman  Act.  But  if  the  owners  of  the  group  make  a 
contract  in  restraint  of  trade  or  commerce  between  the  states, 
then  that  contract  is  a  violation  of  the  Sherman  Act,  and  its 
continuance  will  be  restrained.  But  the  organized  group  will 
not  be  stricken  down,  because  of  this  violation.  It  is  the 
violation  which  is  at  fault,  and  not  the  group. 

So  also,  if  the  owners  of  the  group,  by  unlawful  means, 
exclude  others  from  the  inter-state  trade,  such  exclusion  is  a 
violation  of  the  Sherman  Act,  and  will  be  restrained.  But 
the  organized  group  will  not  be  stricken  down. 

Therefore  in  this  case,  if  the  owners  of  the  organized 
group,  by  contract  to  restrain  commerce  through  restricting 
competition,  or  by  unlawful  acts,  exclude  others  from  the 
inter-state  trade,  the  continuance  of  both  acts  should  be  re- 
strained, but  the  lawful  group  should  not  be  destroyed. 


Northern  Securities  Co.  vs.   United  States,  193  U.  S. 
19T,  346,  Harlan,  J. : 

"The  Federal  Court  may  not  have  the  power  to  for- 
feit the  charter  of  the  Securities  Company;  it  may  not 


—105— 

declare  how  its  shares  of  stock  may  be  transferred  on  its 
books,  nor  prohibit  from  acquiring  real  estate,  nor  dimin- 
ish or  increase  its  capital  stock.  All  these  and  like  mat- 
ters are  to  be  regulated  by  the  state  which  created  the 
company." 


(6)  Continuance  at  the  time  of  filing  the  Bill  is  a 
condition  precedent  to  the  exercise  of  the  Chancellor's 
power  as  to  an  act  which  began  before  the  Bill  was  filed. 
If  that  act  has  ceased,  an  injunction  would  be  useless. 


Tt  is  also  plain  that  as  under  the  Bill  and  the  Sherman 
Act  equity  jurisdiction  is  given  by  it  only  to  merely  restrain 
violations  of  the  act  then  taking  place  or  about  to  begin,  it  is 
immaterial  whether  the  organized  group  was  formed  in  part 
by  acts  themselves  violations  of  the  Sherman  Act.  The  Fed- 
eral Court  is  acting  under  a  Federal  Statute  to  restrain  a  con- 
tinuing Federal  crime.  The  acts  the  Federal  Courts  may 
restrain  are  violations  of  the  Sherman  Act — not  violations  of 
any  supposed  Federal  common  law.  As  the  Sherman  Act 
was  not  passed  until  1890,  acts  prior  to  that  date  would  not 
be  violations  of  the  Act.  Therefore,  it  is  useless  to  consider 
what  the  acts  were  prior  to  1890,  for  they  can  throw  no  light 
on  the  present  controversy.  These  alleged  acts  of  railroad  re- 
bates, alleged  unlawful  exclusion  of  others  (which  we  deny), 
were  ended  long  prior  to  1906  when  this  bill  was  filed.  They 
were  not  then  actually  taking  place.  They  were  ended. 

Evidently  the  Court  below  so  thought  for  as  we  have 
seen,  it  declined  to  find  these  acts  prior  to  1890  were  true  or 
material,  and  though  it  did  find  a  conspiracy,  this  conspiracy 
the  Court  said  began,  not  in  1870,  as  charged  in  the  petition 
but  after  1890. 


—106— 

Let  me  assume,  for  argument's  sake  (which  I  deny)  that 
the  Trust  Agreement  of  1882  was  illegal  at  common  law: 
that  the  present  Standard  Oil  Company  organization  was  by 
illegal  acts  prior  to  1890  enabled  to  increase  its  size:  that 
the  same  Standard  Oil  organization  thus  formed  was  in  ex- 
istence when  the  present  bill  was  filed. 


Would  this  authorize  the  Chancellor,  by  his  decree,  to 
strike  down  the  present  organization  ? 

The  answer  is  plainly  No. 

This  bill  is  under  the  Sherman  Act. 

The  court's  jurisdiction  is  solely  under  that  Act. 

Congress  might  have  broadened  that  Act  to  include  all 
kinds  of  illegal  trade  combinations,  and  have  broadened  the 
powers  of  the  court  as  to  the  relief  granted — but  it  did  not 
do  so.  It  provided  only  for  relief  against  the 

"violations  of  this  Act;" 
and  the  things  which  are  denounced  by  the  act  are  only  two : 

(1)      Contracts  or  combinations  in  restraint  of  trade: 
(2)     Attempts  to  monopolize  by  illegal  means. 

(7)     Government's  failure  of  proof. 

In  1906,  is  there  a  particle  of  proof  that  there  then  ex- 
isted and  was  being  carried  out  any  contract  in  restraint  of 
trade  ?  If  so,  what  is  it  ?  On  what  page  is  the  proof  given  ? 


—107— 

In  1906,  is  there  a  particle  of  proof  that  by  illegal  means 
the  present  organization  was  then  excluding  any  one  from  the 
inter-state  trade  ?  Please  refer  us  to  the  page  proving  it. 

If  the  reply  he  that  the  original  organization  formed 
prior  to  1882  still  continued,  and  this  was  in  part  enlarged 
by  means  illegal  at  common  law,  and  the  organization  itself 
was  also  illegal  at  common  law — and  therefore  the  Sherman 
Act  is  violated — I  answer: 

But  under  the  Sherman  Act  only  continued 

"violations  of  the  Act" 

set  out  in  the  Bill  filed,  give  a  court  of  equity  jurisdiction, 
and  these  facts  must  show  an  existing  continuing  contract  in 
restraint  of  trade  or  a  present  existing  effort  by  illegal  means 
to  gain  a  monopoly  of  it.  Illegal  acts  which  were 
done  prior  to  1906  and  which  were  ended  prior  to  1906 
cannot  be  in  1906  continuing  violations  of  the  Act.  The 
aggregation  of  properties  is  not  of  itself  a  violation  of 
the  Sherman  Act  if  they  are  merely  for  private  trading 
purposes.  This  may  or  may  not  be  a  violation  of  state 
laws,  but  the  Sherman  Act  only  concerns  interstate  com- 
merce, and  it  is  only  the  use  of  the  product  made  on 
or  in  or  by  reason  of  the  properties  that  goes  into  inter-state 
commerce.  Now  this  product  as  it  enters  inter-state  com- 
merce may  do  so  lawfully  or  unlawfully,  but  the  mere  fact 
that  the  men  who  made  it  had  illegally  or  improperly  acquired 
the  properties  on  which  it  was  made,  does  not  of  itself  prove 
that  in  the  bargaining,  sale  or  transportation  of  the  product  in 
inter-state  commerce,  there  necessarily  was  either  a  con- 
tract in  restraint  of  trade  or  an  attempt  to  monopolize.  The 
existence  alone  of  the  aggregation  does  not  prove  a  violation 
of  the  Sherman  Act.  There  must  be  something  more. 

And  so  it  was  ruled  in  the  Calumet  and  Hecla  cases — 
cited  infra,  pages  109-110. 


—108— 

If  it  be  true  that  the  mere  aggregation  of  properties  was 
void  at  common  law  (which  I  deny)  then  I  reply:  But  the 
Sherman  Act  does  not  so  provide.  It  does  not  make  the 
mere  organization  a  violation  of  the  Act,  and  if  it  did  so  pro- 
vide, as  such  an  organization  was  not  of  itself  inter-state  com- 
merce, and  only  after  its  products  went  into  inter-state  com- 
merce the  commerce  clause  would  attach,  its  constitutionality 
would  be  doubtful. 


It  recognizes  as  proper  methods  of  holding  properties 
and  carrying  on  business,  persons,  combinations,  corporations, 
and  trusts. 


//  it  be  said,  however,  that  the  real  question  is  the  ex- 
istence of  the  Power  to  restrain  trade  and  monopolize  it  and 
not  its  actual  exercise  and  that  the  Securities  case  ruled  that 
the  answer  is: 

(1)  The  Securities  case  involved  two  parallel  and 
competing  railroads,  whose  duty  it  was  to  compete  and 
who  could  not  unite.     It  was  unlawful  for  them  to  so 
unite.     Therefore,  the  placing  the  control  of  the  two  in 
possession  of  one  person  was  practically  to  unite  the  two 
and  thus  violate  the  law. 

(2)  But    it  is  lawful    to     purchase    and    group 
properties  for  private  trading  purposes,  and  one  com- 
petitor may  purchase  the  property  of  another.    It  is  law- 
ful to  gain  the  power  to  restrain  trade  and  monopolize 
trade  if  it  is  the  result  of  lawful  competition. 

(3)  Inter-state  commerce  is  not  concerned  with 
the  real  estate  which  does  not  enter  into  interstate  trade. 


—109— 


It  is  concerned  solely  with  the  product  of  it.  The  fact 
that  the  ownership  of  the  group  was  illegally  acquired 
does  not  of  itself  prove  that  the  owners  of  it  have  or  will 
exercise  the  power  to  restrain  inter-state  trade  in  oil  or 
monopolize  the  same. 


Calumet  and  Hecla  Mining  cases  (167  Fed.  Rpt., 
704;  167  Ibid,  721— overruling  155  Ibid,  869).  There  the 
Calumet  Co.  obtained  control  of  the  Osceola  Co.  Considering 
the  lawfulness  of  the  power  to  control  divers  private  trading 
corporations  engaged  in  the  same  business,  the  Circuit  Court 
said,  after  reviewing  all  the  Supreme  Court  cases: 

a*  •*  #  j  £n(j  nothing  in  them  sustaining  the  propo- 
sition that  the  direct,  immediate  and  necessary  effect  of 
a  control  by  a  corporation  over  a  competitor  through  stock 
ownership  is  to  restrain  trade  or  create  a  monopoly  either 
in  manufacturing  or  selling.  *  *  *  Beyond  such 
indirect  restraint  as  is  incidental  to  a  common  manage- 
ment it  is  difficult  to  see  that  competition  will  be  neces- 
sarily unlawfully  restricted.  It  is  true  that  an  oppor- 
tunity for  restricting  competition  is  afforded  by  the  re- 
lation ;  but  this  is  equally  true  of  every  case  of  a  common 
general  management.  *  *  *  In  either  of  the  cases 
presented  further  acts  in  addition  to  the  mere  forces  of 
nature  are  required  to  bring  about  the  restraint  of 
competition  beyond  such  restraint  as  indirectly,  remotely 
and  incidentally  results  from  the  relation  of  a  common 
management  the  authorities  do  not  go  to  the 

extent  of  holding  that  in  the  absence  of  intent  or  of 
special  features  or  conditions  every  case  of  control  by  a 
manufacturing  or  mining  corporation  over  a  competitor 
through  stock  ownership  and  consequent  direction  of  cor- 
porate management  creates  per  se  directly,  immediately 
and  necessarily  a  restraint  upon  trade,  and  I  am  not  pre- 
pared to  hold  that  such  is  the  effect." 


—110— 

The  Circuit  Court  of  Appeals,  167  Fed.  Rptr.,  728,  af- 
firmed this  view,  Judge  Lurton  delivering  the  opinion : 

"But  when  the  agreement  or  combination  in  ques- 
tion does  not  in  its  terms  provide  for  the  suppression  of 
competition,  or  the  creation  of  a  monopoly,  nor  bring 
about  such  a  result  as  a  necessary  legal  consequence,  but 
requires  further  acts  or  conduct  to  bring  about  such  an 
unlawful  result,  some  evidence  of  an  unlawful  intent 
becomes  essential,  and  the  courts  may  say  that  if  not 
stopped  and  prohibited,  restraint  is  likely  to  be  created. 
The  power  of  stock  control  which  the  Calu- 
met Company  has  acquired  may  be  exercised  only  in  a 
legitimate  and  lawful  way  in  the  interests  of  an  economi- 
cal management  of  both  companies.  In  that  case  it  has 
done  nothing  directly  affecting  commerce  among  the 
states.'7 

The  Court  below  in  this  case  so  held.   Judge  Sanborn : 

«  *  *  *  monopolies  of  part  of  interstate  and 
international  commerce  by  legitimate  competition,  how- 
ever successful,  are  not  denounced  by  the  law  and  may 
not  be  forbidden  by  the  courts."  (Rec.  A.,  p.  585). 

Judge  Hook : 

"To  offend  the  Act  the  monopoly  must  have  been 
secured  by  methods  contrary  to  the  public  policy,  as  ex- 
pressed in  the  statutes  or  in  the  common  law. 
Congress  did  not  intend  to  impede  legitimate  commer- 
cial activity  nor  put  a  limit  to  its  fruits."  (Rec.  A,  p. 
589). 


//  the  argument  is,  however,  that  the  original  combina- 
tion of  the  seven  (7)  was  to  gain  a  monopoly,  and  such  an 


—Ill- 
organization  so  combining  and  intending  still  continues  and 
existed  in  1906,  and  this  constitutes  a  violation  of  the  Sher- 
man Act,  I  answer : 

The  Sherman  Act  expressly  recognizes  the  existence  and 
lawful  operation  in  inter-state  trade  of  combinations,  trusts 
and  corporations,  and  it  is  only  when  such  combinations  at- 
tempt to  restrict  trade  that  the  Act  denounces  them — only 
when  by  unlawful  means  they  attempt  to  monopolize,  that 
they  violate  the  Act. 

Neither  at  common  law  nor  under  the  Sherman  Act  was 
it  or  is  it  unlawful  for  seven  (7)  men  to  organize  and  by  law- 
ful competition  and  lawful  means  seek,  to  monopolize  inter- 
state trade. 

Whitwell  vs.  Tobacco  Co.,  125  Fed.,  454. 
As  the  court  below  in  this  case  said  (Rec.  A,  p.  585). 

and  its  true  construction  is  that 
while  unlawful  means  to  monopolize  and  to  continue  an 
unlawful  monopoly  of  interstate  and  international  con)' 
merce  are  misdemeanors  and  enjoinable  under  it,  mo- 
nopolies of  part  of  interstate  and  international  com- 
merce by  legitimate  competition,  however  successful,  are 
not  denounced  by  the  law  and  may  not  be  forbidden  by 
the  courts." 


Tf  it  is  said  that  this  position  allows  the  combination  to 
keep  and  use  property  it  got  by  unlawful  means  the  reply  is, 
NO. 


—112— 

It  only  means  that  under  this  form  of  procedure  that 
question  is  not  before  the  Court. 

There  are  adequate  methods  to  punish  such  acts,  but  an 
equitable  proceeding  under  the  Sherman  Act  is  not  one  of 
them. 

All  the  Court  decides  is  that  Congress  in  its  wisdom  has 
not  deemed  it  proper  to  give  any  other  equitable  relief  than  en- 
joining the  continuance  of  the  unlawfully  restricting  trade  or 
monopoly  of  the  same. 


Objections  to  Decree. 

It  is  too  general — too  vague — too  indefinite — too  broad. 

It  includes  business  within  a  state  as  well  as  between 
states.  Yet  admittedly  the  Sherman  Act  only  covers  inter- 
state commerce. 

It  seeks  to  regulate  and  control  the  ownership  of  and 
uses  of  private  property  in  the  hands  of  persons  not  parties 
to  this  Bill. 

It  denies  to  each  individual  defendant  the  right  of  hold- 
ing his  property  as  he  chooses  either  by  legal  or  by  equitable 
title. 

It  denies  him  his  right  to  buy  what  he  may  of  all  the 
physical  properties  the  Standard  Oil  Company  owns  whether 
such  be  "potentially"  competitive  or  not.  (See  opinions  of 
Justices  Brewer  and  Holmes  in  Northern  Securities  Com- 
pany case,  193  U.  S.) 


—113— 

It  repeatedly,  in  speaking  of 'a  person  (party)  designates 
him  as  (Section  6) 

"potentially  competitive  parties" 

"potentially  competitive  party" 

"potentially  competitive  parties" 
without  otherwise  designating  him. 

It  does  not  earmark  the  unit  nor  designate  how  one 
shall  determine  who  are  and  who  are  not 
"potentially  competitive  parties." 


It  enjoins  the  individual  defendant  from  making 
"any  express  or  implied  agreement  or  arrangement  to- 
gether or  with  one  another  *  *  relative  to  the 
control  or  management  of  any  of  said  corporations  or 
the  price  or  terms  of  purchase  or  of  sale  or  the  rates  of 
transportation  of  petroleum  or  its  products  in  inter-state 
or  international  commerce  or  relative  to  the  quantities 
thereof  purchased,  sold,  transported  or  manufactured  by 
any  of  said  corporations." 

And  while  it  adds  a  qualification  "which  will  have  a 
like  effect"  as  the  present  combination,  it  does  nothing  to  in- 
dicate how  one  can  determine  that  and  tell  what  would  and 
what  would  not  have  a  like  effect,  and  without  limitation  of 
time,  compels  the  individual  to  transact  business  under  in- 
tolerable conditions. 


As  the  evident  purpose  of  the  decree  is  to  compel  com- 
petition where  none  ever  before  existed,  and  if,  as  the  opin- 
ion and  decree  seems  to  decide,  each  one  of  these  companies, 
and  each  individual  is  a  competitor  of  all  the  others,  the  result 
will  be  baffling. 


Some  of  the  situations — 

(a)  Here  are  say  twenty  companies  each  actually 
helping  in  producing  refined  oil — what  alliance,  if  any, 
may  each  one  of  these  forty  have  either  with  one  or  more 
of  the  refineries  or  one  or  more  of  the  pipe  lines,  or  one 
or  more  of  the  tank  reservoirs? 

(b)  Here  are  eleven  pipe  line  companies  carrying 
oil.     What  contracts  may  any  refinery  or  oil  well  OP 
reservoir  have  with  any  one  or  more  of  them  ? 

(c)  What  contract  relations  may  each  individual 
have  with  any  one  or  more  of  the  refineries — other  pipe 
lines — tank  lines  or  reservoirs  ? 


And  yet  each  corporation  and  individual  must  do  business 
under  threat  of  imprisonment  of  its  managers  if  a  move  or 
a  contract  or  sale  or  purchase  be  made  which  a  Judge  may 
think  restricts  commerce  or  tends  to  monopoly. 


The  decree  seeks  to  and  does,  under  Section  6,  follow  and 
control  the  use  of  the  stocks  of  the  individual  stockholders  in 
their  hands  in  the  sub-companies,  and  to  hamper  and  restrict 
such  stockholders  in  the  use  they  shall  make  of  them — to 
whom  they  shall  be  sold.  No  one  of  these  individual  persons 


—115— 

is  a  party  to  this  Bill.  They  have  never  been  heard  or  had 
an  opportunity  of  being  heard  on  the  justness  of  such  con- 
clusion, and  therefore  as  against  each  of  them  the  decree  is  in 
that  respect  void. 

Corporations  parties  to  the  Bill  do  represent  their  stock- 
holders, but  only  within  the  scope  of  corporate  power  and  con- 
trol over  such  stockholders,  but  not  as  to  the  individual  rights 
of  the  stockholder  to  do  with  his  property  as  he  chooses. 

Brown  vs.  Pacific  Mail  Steamship  Co.,  Fed.  Cas.  No. 
2,025,  5  Blatch.,  525 : 

A  bill  was  filed  against  the  Pacific  Mail  Steamship  Com- 
pany and  certain  of  its  stockholders  to  enjoin  the  voting  of 
stock  by  the  latter  at  an  election  of  directors. 

The  Court  sustained  the  bill,  but  refused  to  include  in 
the  injunction  stockholders  who  had  not  been  served  with 
notice  of  the  application  for  the  injunction. 
Judge  Blatchford  said: 

*  the  words  'and  all  the  other  share- 
holders of  the  Pacific  Mail  Company,'  which  are  in  the 
prayer  of  the  bill,  must  be  stricken  out  from  the  in- 
junction. I  do  not  think  I  can  enjoin  the  other  share- 
holders without  notice,  or  that  service  upon  the  Pacific 
Mail  Company  is  to  be  considered,  for  the  purpose  of 
this  second  prayer,  as  service  on  such  other  share- 
holders." 


Under  constant  threat  of  proceedings  for  contempt  in  the 
violation  of  such  a  broad,  comprehensive,  and  yet  vaguely 
worded  decree  (Section  6)  that  no  one  could  in  advance  cer- 


—116— 

tainly  foretell  whether  any  given  act  was  a  violation — how 
could  business  be  carried  on. 

It  seeks  to  and  does  cover  the  future  business  operations 
of  the  defendants  in  petroleum  and  now  adjudges,  but  in  a 
vague  and  indefinite  way,  in  advance  of  the  facts,  and  the 
exact  situation  in  the  future,  what  things  may  be  or  may  not 
then  be  done. 

It  does  not,  as  the  Sherman  Act  says  it  may,  after  and 
upon  petition  filed 

"restrain  violations  of  the  Act" 

but  without  a  petition  filed,  and  without  a  hearing  as  to  any 
future  act,  it  now  condemns  certain  of  them,  but  which  ones 
no  man  can  tell  till  the  case  comes  to  trial  on  proceedings 
for  contempt. 

(See  remarks  of  Judge  Hook  in  the  court  below).  (Rec. 
A,  p.  587). 


The  Sherman  Act  closely  limits  and  defines  the  power 
of  the  court  on  a  petition  filed  to  give  equitable  relief. 

Section  4  of  that  Act  is  printed  (ante,  page  82). 

The  things  the  Court  may  do  are : 

"to  prevent  and  restrain  violations  of  this  Act'7 

"restrain  such  violations." 


—117— 

The  petition  must  pray 

"that  such  violations  shall  he  enjoined  or  otherwise  pro- 
hibited." 

It  is  these  VIOLATIONS  of  the  Act  that  the  court  may 
enjoin,  and  only  such  violations. 
But  the  court  helow  enjoined  all  the  defendants  from 

"engaging  or  continuing  in  commerce  among  the  states" 
until  a  certain  event. 

The  very  purpose  of  the  Sherman  Act  is  to  encourage 
and  promote  inter-state  commerce,  and  to  restrain  one  from 
engaging  in  it  is  a  strange  way  of  promoting  it. 

This  portion  of  the  decree  is  clearly  not  within  the  words 
of  the  Sherman  Act. 


Assume  for  argument's  sake  that  the  Standard  Oil  com- 
bination of  1899  is  illegal  (which  we  deny),  yet  the  seven 
(7)  individual  appellants  may  in  the  future,  as  part  of  their 
constitutional  rights,  engage  in  inter-state  commerce  by  them- 
selves singly  or  jointly  or  with  others.  The  Sherman  Act 
does  not  impose  the  penalty  that  if  one  once  violate  the  Act 
he  forever  or  for  a  time  loses  his  right  to  engage  in  inter- 
state commerce. 

Where,  then,  does  the  court  below  find  its  authority  to 
authorize  it  to  enter  such  a  decree,  especially  when  that  court 
recognized  the  doctrine  of  this  court. 

"Past  unlawful  competition  does  not  deprive  parties 
of  their  right  to  conduct  lawful  competition.'" 

New  Haven  R.  R.  case,  200  U.  S.  361,  404. 


—118— 

Undoubtedly  a  court  in  equity  may  and  must  shape  its 
decree  to  suit  the  pending  case,  and  hundreds  of  cases  may 
be  cited  to  so  prove — but  each  of  such  decrees  was  suitable 
to  the  facts  and  the  law  as  it  then  existed.  But  when  Con- 
gress sees  fit  to  pass  a  new  statute  creating  a  new  offense 
which  it  designates  as  a  crime  and  gives  a  new  and  limited 
jurisdiction  to  the  Chancellor,  and  the  Act  itself  defines  the 
power  of  the  court,  is  it  not  plain  that  the  Chancellor  is  re- 
stricted in  such  cases  to  such  named  powers?  As  the  Sher- 
man Act  says,  the  power  of  the  court  is  to  prohibit  and  enjoin 

"violation  of  this  Act." 

Does  not  that  define  the  court's  power  ?  The  Act  does  not  say 
"You  can  appoint  a  receiver  for  a  trust,"  or  "You  can  fine  it 
or  put  in  jail  the  guilty  members."  As  the  Act.  does  not  so 
say,  is  it  possible  the  court  can  exercise  such  powers — merely 
because  they  would  prove  effective? 

The  very  purpose  of  the  Act  was  to  make  inter-state 
trade  free,  open,  and  encourage  every  one  to  enter  it.  But 
this  decree  prevents  seven  (7)  citizens  of  the  United  States 
and  their  associates  from  doing  so  until  some  other  thing  done 
in  the  past  has  been  effectively  repented  for,  and  works  meet 
for  such  repentance  have  been  done. 

This,  the  Act  never  said  a  Chancellor  could  do. 

•  , 

This  court  never  so  held. 

And  with  great  respect  it  is  asserted  there  is  not  a  con- 
trolling analogy  or  authority  that  authorizes  such  a  decree. 


—119— 

Effect  of  the  Decree. 
The  seven  (7)  individual  defendants  and 

Thirty-eight  (38)  corporate  defendants  are  named  in 
Section  2  of  the  decree  as  having  formed  a  combination  in 
restraint  of  inter-state  trade.  The  corporations  include 
eleven  pipe  line  companies — fifteen  refining  companies — 
seven  marketing  companies — four  producing  companies,  and 
one  tank  line  company. 

The  decree  carried  out  compels: 

(1)  Each  one  of  these  companies  to  stand  single 
and  alone  and  without  any  relation  to  another : 

(2)  Each  one  to  compete  with  all  the  others: 

(3)  Each  to  refrain  from  either  expressly  or  im- 
pliedly  having  any  contract  relation  with  each  other  in 
reference  to 

(a)  The  control  or  management  of  any  of  said 
corporations : 

(b)  Or  the  price  or  terms  of  purchase  or  of 
sale,  or  the  rates  of  transportation  of  petroleum  or 
its  products  in  interstate  commerce: 

(c)  Or   the   quantity   thereof  purchased,   sold 
or  transported  or  manufactured  by  any  of  them  ; 

(d)  And  then  adds 

"which  will  have  a  like  effect  in  restraint 
of  commerce." 

The  effect  of  this  decree  is  to  take  away  from  the  in- 
dividuals defendant  and  from  the  Standard  Oil  Company  of 
New  Jersey  any  and  all  joint  control  over  the  different  sub- 
companies,  and  to  prevent  them  from  exercising  that  control 


—120— 

in  any  way  whatsoever  in  the  future,  either  by  creating  a  new 
corporation  or  by  agreeing  or  contracting  together  with  one 
another  in  any  way  whatsoever  with  respect  to  such  control. 

In  other  words,  the  effect  is  to  compel  the  different  sub- 
companies  named  in  the  bill  to  stand  alone,  to  act  independ- 
ently from  all  and  each  of  the  others,  to  compete  with  one  an- 
other, and  yet  every  one  of  such  units  will  be  owned  by  the 
same  individuals  and  in  the  same  proportions. 

The  inherent  vice  of  this  decree  is  that  it  seeks  to  create 
an  artificial  division  which  never  existed  before;  it  does  not 
seek  to  compel  members  who  were  formerly  independent  to 
resume  that  independence,  but  it  seeks  to  compel  different 
sub-companies,  which  have  never  been  independent,  which 
have  never  been  more  than  mere  agencies  created  for  certain 
purposes,  to  sever  their  allegiance  with  their  principal,  and  to 
stand  apart,  independent  and  hostile  to  that  principal  and  to 
each  other. 

In  the  cases  heretofore  where  an  injunction  has 
been  granted,  the  purpose  of  the  injunction  has  always  been 
restorative;  the  decree  has  always  aimed  to  put  things  back 
into  the  place  they  occupied  before  and  under  like  conditions 
as  before  the  contract  or  combination  distorted  affairs  and  dis- 
turbed the  course  of  inter-state  trade ;  thus  where  A,  B  and  C 
are  each  the  owner  of  an  independent  competing  business  an 
injunction  will  restrain  them  from  combining  together  to 
control  prices  or  to  divide  up  the  territory  between  them  or 
to  in  any  way  destroy  competition,  when  this  would  affect 
the  interstate  trade,  and  an  injunction  restraining  the  com- 
bination merely  puts  them  back  where  they  were  before,  as 
separate  independent  competitors. 


—121— 

But  the  relief  granted  in  the  case  at  bar  is  wholly  diifer- 
ent  from  that.  This  is  a  case  where  seven  individuals  nnd 
their  associates  have  been  engaged  in  a  common  business,  act- 
ing together  for  thirty-four  years,  with  common  interests, 
with  common  aims,  and  now  having  a  great  business  built  up 
by  common  effort,  divided  for  convenience  in  operation  into 
numerous  separate  departments  or  agencies,  and  practically 
all  built  by  their  own  hands,  acting  not  separately,  but  joint- 
ly. Now  comes  this  decree  which  seeks  to  split  up  this  busi- 
ness into  as  many  independent  parts  as  the  owners  have  seen 
fit  to  divide  it  into  departments  or  agencies,  and  to  compel 
each  of  these  departments  or  agencies  to  stand  alone.  The 
effect  is  not  that  men  who  have  been  operating  independently 
heretofore  shall  continue  to  remain  independent,  but  that 
seven  men  and  their  associates  who  have  been,  as  it  were,  in 
partnership  for  thirty-four  years,  shall  dissolve  that  partner- 
ship; not  that  competition  shall  be  restored  to  its  former  con- 
dition, but  that  a  competition  which  never  existed  shall  be 
created;  in  other  words,  it  is  not  sought  to  restore  an  old,  but 
to  create  an  entirely  new  status  and  new  competition. 

To  cite  some  concrete  examples  of  the  things  sought  to 
be  attained  by  the  proceeding  in  this  case : 

(a)  The  seven  individual  appellants  and  their  as- 
sociate now  own  54,616  miles  of  pipe  line,  and  for  ease 
of  management  have  divided  the  whole  into  eleven  dif- 
ferent parts,  putting  each  part  under  the  control  of  a 
separate  corporation,  these  all  being  named  in  Section  2 
of  the  decree,  as  follows:  Buckeye  Pipe  Line  Com- 
pany, Crescent  Pipe  Line  Company,  Cumberland  Pipe 
Line  Company,  Eureka  Pipe  Line,  Indiana  Pipe  Line 
Company,  National  Transit  Company,  New  York  Tran- 
sit Company,  Northern  Pipe  Line  Company,  Prairie 
Oil  &  Gas  Company,  Southern  Pipe  Line  Company, 
Southwest  Pennsylvania  Pipe  Line  Company. 


—122— 

These  companies  jointly  own  54,616  miles  of  pipe  lines, 
of  which  the  seven  individual  defendants  and  their  associates 
built  over  50,000  miles. 

In  these  pipe  lines  the  seven  individuals  and  their  as- 
sociates have  an  investment  of  over  $61,000,000.00. 

All  of  these  different  lines  are  joined  together  into  one 
compact,  connected  system  and  operated  as  a  whole.  With 
the  insignificant  exceptions  already  noted  in  another  place,  no 
cne  except  the  seven  individuals  and  their  associates  were  ever 
in  any  way  interested  in  any  of  these  pipe  lines ;  the  owners 
who  huilt  them  divided  up  this  complicated  system  into  eleven 
different  divisions  and  gave  the  control  of  each  of  these  divis- 
ions to  an  agency  created  hy  themselves  for  the  purpose  of 
local  supervision  and  control ;  these  agencies  comprise  the 
twelve  pipe-line  sub-companies.  These  local  sub-companies 
were  never  independent,  never  did  compete,  never  were  any- 
thing but  the  agents  of  the  seven  individuals  and  their  asso- 
ciates, the  prcdvd  of  those  individuals'  joint  creative  labor. 

This  decree  splits  up  this  pipe  line  system  into  eleven 
different  parts,  takes  away  from  the  owners,  who  jointly  built 
the  pipe  lines  and  who  created  the  sub-companies,  all  control 
over  the  different  sub-companies,  and  compels  the  eleven  dif- 
ferent parts  to  stand  alone,  independently  of  their  principal 
and  of  each  other,  to  be  hostile  to  and  to  compete  with  their 
principal  and  with  one  another. 

(b)  The  seven  individuals  and  their  associates  working 
jointly,  have  dotted  the  world  with  selling  stations,  costing 
from  $1,000  to  $20,000  each  and  upwards.  In  1882  they 
had  130,  most  of  which  they  built,  some  of  which  they 
bought;  in  1908  they  had  3,242,  almost  every  one  of  which 
they  built  with  their  own  hands. 


—123— 

They  put  these  selling  stations  chiefly  under  the  control 
of  five  marketing  companies — the  Standard  Oil  Company  cf 
New  York,  the  Standard  Oil  Company  of  California,  the 
Standard  Oil  Company  of  Kentucky,  the  Standard  Oil  Com- 
pany of  Indiana,  and  the  Continental  Oil  Company. 

Now  by  this  decree,  these  companies  must  stand  alone, 
which  they  never  did  before,  must  compete  in  the  marketing 
business,  which  they  never  did  before,  must  be  hostile  to  their 
principal  and  to  each  other. 

(c)  The  seven  individuals  and  their  associates  operate 
at  the  present  time  about  eighteen  (18)  refineries.  John  D. 
Rockefeller,  Samuel  Andrews  and  William  Rockefeller  origi- 
nally built  the  one  now  operated  in  Cleveland  about  1865 ; 
this  refinery,  immensely  enlarged  and  very  greatly  improved, 
is  now  under  the  control  of  the  Standard  Oil  Company  of 
Ohio ;  the  Solar  Refining  Company  was  created  by  the  seven 
individual  appellants  and  their  associates  in  1885,  who  con- 
structed the  refinery  at  Lima ;  the  Standard  Oil  Company  of 
Indiana  was  created  in  1889  and  built  the  great  refinery  at 
Whiting  and  one  at  Sugar  Creek,  Missouri ;  the  Standard  Oil 
Company  of  Kansas  was  created  in  1892  and  constructed  the 
refinery  at  Neodesha ;  the  seven  individuals  and  their  asso- 
ciates also  built,  through  the  agency  of  the  Standard  Oil  Com- 
pany of  California,  a  great  refinery  near  San  Francisco  in 
1903,  and  one  at  Marcus  Hook,  New  Jersey,  in  1895,  through 
the  agency  of  the  Atlantic  Refining  Company.  Of  the  other 
refineries  which  they  own,  none  of  them  has  been  purchased 
since  1882,  and  all  those  originally  purchased  have  been  vast- 
ly enlarged  and  improved ;  the  one  purchased  in  1882  at  $84,- 
000.00  now  being  worth  $1,450,000.00. 

This  decree  takes  away  from  the  seven  individuals  and 
from  the  Standard  Oil  Company  of  New  Jersey  all  control, 


—124— 

all  supervision  over  these  different  refining  companies,  even 
over  those  which  they  themselves,  working  jointly,  have  abso- 
lutely created  with  their  own  joint  means,  and  compels  these 
refineries  to  stand  alone,  to  be  independent,  to  compete  with 
one  another. 

(d)  To  facilitate  the  shipments  of  refined  oil,  gasoline, 
etc.,  over  the  railroads  of  the  United  States,  the  seven  indi- 
viduals and  their  associates  have  huilt  over  10,000  tank  cars 
for  their  own  use,  and  today  have  them  on  every  railroad  on 
the  continent.     For  the  purposes  of  efficient  control  and  man- 
agement they  put  all  these  tank  cars  in  charge  of  a  sub-agent, 
the  Union  Tank  Line  Company.     The  company,  its  property, 
its  business,  its  capital,  are  all  and  absolutely  the  work  of  the 
seven  individuals  and  their  associates,  and  these  tank  cars 
are  valuable  only  as  they  are  used  with  the  entire  plant,  and 
especially  refineries.     And  now,  perforce,  this  corporation  is 
cut  away,  must  stand  alone,  cannot  be  controlled  in  any  sense, 
manner  or  form  by  its  founders  and  owners ;  must  itself,  the 
creature,  compete  with,  fight  against  its  creator. 

(e)  Along  with  their  other  developments,  the  Standard 
interests  have  created  a  great  foreign  trade.     Every  civilized 
country  on  earth  is  dotted  with  their  selling  stations.     This 
foreign  commerce  is  of  immense  volume,  being  63%  of  the 
illuminating  oil  produced  and  of  course  a  large  per  cent,  also 
of  the  by-products. 

In  order  to  best  economize  their  efforts,  they  put  practi- 
cally all  this  foreign  trade  under  the  control  of  one  corpora- 
tion, the  Standard  Oil  Company  of  New  York.  That  Com- 
pany owns  the  ships,  the  docks,  the  selling  stations  in  the  dif- 
ferent countries;  with  some  few  exceptions  as  in  Great  Bri- 
tain where  the  Anglo-American  Oil  Company  takes  care  of 
the  selling  business.  The  other  companies  that  export  oil 


—125— 

do  it  through  the  Standard  of  New  York.  The  chief  com- 
panies that  thus  export  oil  are  the  Standard  Oil  Company  of 
New  Jersey,  the  Atlantic  Refining  Company,  Standard  Oil 
Company  of  California,  and  the  Standard  Oil  Company  of 
New  York. 

These  different  companies  are  all  named  in  Section  Two 
of  the  decree,  and  it  is  difficult  to  see  how  the  present  ar- 
rangement can  be  continued  without  violating  the  sweeping 
terms  of  Section  Six  of  that  decree.  If  the  Standard  of  Cali- 
fornia, the  Standard  of  New  Jersey  and  the  Atlantic  Refin- 
ing Company  all  do  their  exporting  through  the  Standard  of 
New  York,  they  will  certainly  not  be  competing  in  the  for- 
eign trade,  and  this  would  clearly  be  such  an 

"express  or  implied  agreement  or  arrangement  together 

or  one  with  another," 
as  to  come  within  the  terms  of  Section  Six  of  the  decree. 

This  decree  means,  therefore,  that  all  these  different 
companies  must  enter  the  contest  for  the  foreign  trade,  each 
fighting  with  the  other.  If  they  are  to  continue  in  that  trade, 
each  must  buy  or  build  ships,  each  must  establish  selling  sta- 
tions, each  send  representatives  to  the  different  foreign  coun- 
tries, underbid  one  another  for  the  trade,  each  company 
scheme  to  supplant  the  other.  Although  France,  for  instance, 
is  already  well  covered  with  selling  stations  by  the  Standard 
of  New  York,  yet  the  other  companies  (all  owned  by  the  same 
men  who  own  the  Standard  of  New  York)  must  enter  that 
country,  establish  selling  stations,  actively  compete  with  the 
Standard  of  New  York  and  with  each  other  to  the  great  finan- 
cial loss  of  all  of  them. 

As  in  the  above  instances  cited  a  competition  in  foreign 
trade  is  to  be  created  where  none  ever  existed  before. 


—126— 

(f)  It  unlawfully  restricts  and  limits  the  individual 
rights  of  each  of  the  seven  defendants  by  preventing  each 
from  purchasing  with  his  individual  means  such  of  the  prop- 
erties of  the  Standard  Oil  Company  of  I^ew  Jersey  as  he  may 
desire,  and  also  restrains  the  stockholders  and  corporations 
from  selling  to  one  such  properties. 

It  distinctly  denies  the  right  of  an  individual  with  his 
own  means  to  buy  all  such  properties. 

The  individual  defendants  and  their  associates,  by  the 
labor  of  their  own  hands,  have  built  up  a  mighty  business,  not 
by  combinations  of  and  agreements  with  competing  interests, 
but  almost  wholly  by  construction;  they  have  divided  the 
business  for  the  purposes  of  local  control  and  government  into 
a  number  of  different  departments  or  agencies.  These  have 
each  been  put  under  the  control  of  an  agent,  a  sub-company. 
These  latter  are  the  sub-companies  named  as  defendants  in 
the  petition. 

May  the  courts,  under  the  Sherman  Act,  split  up  this 
homogeneous  business  into  as  many  independent  parts  as  the 
owners  have  seen  fit  to  create  departments  or  agencies? 

May  the  courts,  under  the  Sherman  Act,  take  away  all 
control  of  the  men  who  created  both  the  sub-companies  and 
fhe  property  under  their  control,  and  compel  each  of  these 
agents,  these  sub-companies,  to  become  independent,  to  com- 
pete with  each  other. 


—127— 

The  decree  must  stand,  if  at  all,  upon  one  of  two  propo- 
sitions : 

(1)  The  Sherman  Act  forbids  men  to  unite  their 
abilities  and  their  means,  through  partnerships  and  the 
like,  for  the  joint  development  of  an  industrial  enter- 
prise; it  denounces  all  united  action,  requires  each  man 
to  work  by  himself; 

(2)  If  men  may  work  jointly,  the  Sherman  Act 
requires  that  each  industrial  unit  which  they  create  must 
stand  separate,  apart,  free  from,  hostile  to  every  other 
industrial  unit  which  they  create.     If  they,  the  creators, 
hold  these  units  jointly,  and  do  not  require,  or  at  least 
permit  them  to  compete  with  one  another,  they  have 
formed  a  combination  and  a  monopoly  in  violation  of 
law,  and  may  be  sent  to  jail  for  the  crime. 

And  is  this  not  a  demonstration,  a  reductio  ad  alisurdum, 
conclusively  showing  that  this  decree  cannot  stand? 


We  submit  that  there  are  no  precedents  in  the  books  nor 
logical  reason  justifying  such  a  confiscatory,  such  a  ruinous 
decree  as  entered  in  this  case;  that  such  a  decree  if  carried 
to  its  logical  conclusion  attacks  the  very  foundations  of  the 
modern  business  world. 


—128— 

THE  GOVERNMENT,  NOT  HAVING  AP- 
PEALED, CANNOT  ASSIGN  ERROR  TO  THE  DE- 
CREE OF  THE  COURT  BELOW,  OR  OBJECT 
TO  ITS  FINDINGS  OF  FACT,  OR  ASK  TO  HAVE 
ADDITIONAL  FACTS  FOUND  WHICH  THE 
COURT  BELOW  DID  NOT  FIND.  IF  THE  FACTS 
FOUND  ARE  NOT  SUFFICIENT  TO  SUPPORT 
THE  DECREE,  THE  CASE  MUST  BE  REVERSED. 


The  Government  has  not  excepted  to  or  appealed 
from  the  finding  of  facts  in  the  decree  of  the  Court  be- 
low, and  THEREFORE  in  a  case  of  this  nature  where 
an  extraordinary  special  remedy  is  given,  it  is  concluded 
by  such  finding. 

We  submit  that  the  Government  must  stand  or  fall  on 
that  opinion — on  the  findings  of  fact  in  that  opinion — and  on 
the  decree. 

We  appealed  from  it.     The  Government  did  not. 
We  filed  exceptions  to  it.     The  Government  did  not. 

The  Government,  we  submit,  stands  and  must  stand  on 
that  opinion  and  that  decree.  It  cannot  now  and  in  this 
court  claim  another  decree  by  disregarding  that  opinion  and 
that  decree. 

The  charges  made  in  the  bill  were  of  a  conspiracy  in 
1870  and  different  unlawful  acts  were  charged  prior  to  1890. 
Rebates  from  railroads  were  charged.  Illegal  contracts  with 
railroads  were  alleged.  Unlawful  acts  of  competition.  All 


—129— 

these  were  in  pursuance  of  a  conspiracy  made,  the  bill  said, 
in  1870  and  continued  until  1906. 

The  Court  below  found  the  conspiracy  originated  since 
1890,  not  in  1870  and  followed  by  the  unlawful  acts  prior 
to  1890,  but  the  conspiracy  did  not  originate  until  after  1890. 

Is  not  this  a  distinct  finding  of  fact,  which,  unappealed 
from  by  the  Government,  is  conclusive  on  it  ?  The  words  of 
the  decree  are: 

The  decree  recited  that  (Section  1)  in  and  prior  to  the 
year  1899  there  were  twenty  corporations  in  various  states 
engaged  in  commerce  in  petroleum  and  its  products  among 
the  states,  and  that  one  of  these  was  the  Standard  Oil  Com- 
pany of  New  Jersey; 

"that   since  the   year   1890   the   defendants  named   in 
section  two  of  this  decree  have  entered  into  and  are 
carrying  out  a  combination  or  conspiracy,  in  pursuance 
whereof  about  the  year  1899"     *     *     * 
they  increased  the  capital  stock  of  the  corporation  and  con- 
veyed to  it  the  different  properties. 

"That  this  combination  or  conspiracy  is  a  combina- 
tion or  conspiracy  in  restraint  of  trade  and  commerce 
in  petroleum  and  its  products  among  the  several  states, 
in  the  territories  and  with  foreign  nations.  *  *  *" 
Section  2: 

"That  the  defendants,  John  D.  Eockefeller,  William 
Eockefeller,  Henry  H.  Eogers,  Henry  M.  Flagler,  John 
D.  Archbold,  Oliver  H.  Payne,  and  Charles  M.  Pratt, 
hereafter  called  the  seven  individual  defendants,  united 
with  the  Standard  Oil  Company  and  other  defendants  to 
form  and  effectuate  this  combination,  and  since  its  for- 
mation have  been  and  still  are  engaged  in  carrying  it 
into  effect  and  continuing  it." 


—130— 

Here  follow  the  names  of  the  different  corporations,  and 
this  portion  of  the  decree  giving  these  names,  then  continues : 
"have  entered  into  and  became  parties  to  this  combina- 
tion and  are  either  actively  operating  or  aiding  in  the 
operation  of  it;  that  by  means  of  this  combination  the 
defendants  named  in  this  section  have  combined  and 
conspired  to  monopolize,  have  monopolized,  and  are  con- 
tinuing to  monopolize  a  substantial  part  of  the  com- 
merce among  the  states,  in  the  territories  and  with  for- 
eign nations,  in  violation  of  section  2  of  the  anti-trust 
act" 


Is  not  this  a  distinct  finding  of  fact — which  unappealed 
from  by  the  Government  is  conclusive  on  it. 

We  have  hereinbefore  (pages  15-30)  especially  con- 
sidered the  Court's  opinion  on  facts,  and  have  called  atten- 
tion to  the  fact  that  no  finding  in  that  opinion  supports  the 
averments  of  the  bill  or  conflicts  with  the  findings  of  fact 
in  the  decree.  In  treating  of  the  fact  whether  the  seven  did 
control  the  group,  the  Court  found  they  did,  but  did  not  find 
they  conspired  to  do  any  unlawful  act  prior  to  1890.  The 
Court  did  say  they  combined  (not  conspired)  to  secure  con- 
trol of  competing  refineries,  but  such  combination  was  not 
unlawful  if  it  used  lawful  means,  and  the  Court  did  not  find 
such  unlawful  means  were  used  or  intended. 

Webster  defines  Combine: 

"To  form  a  union;  to  agree;  to  coalesce;  to  con- 
federate." 

He  defines  Conspiracy: 

"A  combination  of  men  for  an  evil  purpose.  An 
agreement  between  two  or  more  persons  to  commit  a 
crime  in  concert." 


—131— 

If  it  is  now  alleged  by  the  Government  that  there  are 
facts  in  this  case  which  the  Court  below  should  have  found, 
but  did  not,  and  which  facts  the  Government  now  asks  this 
Court  to  find,  the  reply  is  the  Government  has  not  appealed, 
and  under  the  established  practice  cannot  now  be  heard  to  al- 
lege  error  on  the  part  of  the  Court  below. 

What  the  Government  asks  this  Court  to  do  is  practically 
to  allow  it  to  assign  error. 

This  proceeding  is  in  Equity,  but  by  a  special  statutory 
proceeding  wherein  the  power  of  the  Court  is  sharply  defined. 
It  is  a  summary  proceeding  on 

"petition  setting  forth  the  case/' 

As  soon  as  the  parties  are  notified 

"the  Court  shall  proceed  as  soon  as  may  be  to  the  hear- 
ing and  determination  of  the  case." 

In  such  a  proceeding,  to  allow  the  Government  to  turn 
its  back  on  the  case  as  the  Court  below  ruled  it,  and  claim 
that  this  Court  should  take  up  and  consider  nearly  twenty 
thousand  (20,000)  pages  of  evidence  in  passing  on  disputed 
questions  of  fact,  and  that  with  the  necessarily  limited  time 
counsel  have  for  argument  in  the  crowded  condition  of  the 
dockets  of  this  court  they  should  argue  and  discuss  such  evi- 
dence, is,  we  submit,  unreasonable. 

A  party  cannot  complain  of  a  finding  from  which  he  has 
taken  no  appeal. 

McGourkey  vs.  Toledo  &  Ohio  Railway,  146  U.  S.,  536, 
569: 


«  *     * 


as  no  appeal  was  taken  by  the  defend- 
ant from  this  decree,  of  course  it  is  not  entitled  to  com- 
plain of  this  finding  in  this  court." 


—132— 

Chittenden  et  al.  vs.  Brewster,  2  Wallace,  p.  195 : 

"  *  *  *  the  rule  is  settled  in  the  appellate 
court  that  a  party  not  appealing  cannot  take  advantage 
of  an  error  in  the  decree  committed  against  himself,  and 
also  that  the  party  appealing  cannot  allege  error  in  the  de- 
cree against  the  party  not  appealing.  If  the  appellees  de- 
sired to  avail  themselves  of  this  error  in  the  decree  they 
should  have  brought  a  cross  appeal.  By  omitting  to  do 
so  they  submit  the  correctness  of  the  decree  as  to  them. 
The  case  stands  before  the  appellate  tribunal  the  same 
as  if  the  error  had  been  waived  at  the  hearing." 


Carey  vs.  Brown,  92  U.  S.,  p.  175. 


The  "Stephen  Morgan"  94  TJ.  S.,  p.  604. 

Mount  Pleasant  vs.  Bedcwith,  100  U.  S.,  p.  527 : 

"Parties  who  do  not  appeal  from  the  final  decree 
of  the  Circuit  Court  cannot  be  heard  in  opposition  to 
the  same  when  the  case  is  regularly  brought  here  by 
other  proper  parties.  They  may  be  heard  in  support  of 
the  decree  and  in  opposition  to  every  assignment  of 
error,  but  they  cannot  be  heard  to  show  that  the  decree 
below  was  erroneous." 


London  vs.  Taxing  District,  104  U.  S.,  p.  774: 

"The  city  took  an  appeal  from  that  part  of  the 
decree  which  gave  to  the  appellant  affirmative  relief,  but 
that  appeal  has  been  dismissed  *  *  *  for  want  of 
prosecution.  The  case  stands  here  now  as  though  no 
such  appeal  had  been  taken.  The  city  can  therefore 
only  be  heard  in  support  of  the  decree  as  it  stands.  This 
has  long  been  the  settled  rule  in  this  court.  ATI  appeal 


—133— 


brings  up  for  review  only  that  which  was  decided  ad- 
versely to  the  appellant." 


Landram  vs.  Jordan,  203  U.  S.,  p.  62 : 

"According  to  the  rule  that  has  been  laid  down  in 
this  court,  Gabriella,  as  she  did  not  appeal,  cannot  go 
beyond  supporting  the  decree  and  opposing  every  assign- 
ment of  error." 

Daniell's  Chancery  Pleading  and  Practice,  vol.   2,  p. 
1488: 

"But  if  the  application  is  to  discharge  an  order  as 
not  being  justified  by  the  evidence  which  has  been  used 
in  the  Court  below,  the  Court  of  Appeals  looks  at  that 
evidence  only  which  is  recited  in  the  order  as  having 
been  read." 

At  p.  1459,  note: 

"The  distinction  between  an  appeal  in  Chancery 
and  an  appeal  to  the  House  of  Lords  is  important,  and 
should  be  borne  in  mind;  for  the  effect  of  the  appeal  is 
different,  and  it  is  the  latter  class  of  appeals  which  pre- 
vails in  the  United  States.  An  appeal  in  Chancery 
is  a  rehearing,  and  the  Appellate  Court  has 
power  to  deal  with  the  whole  case.  Kireton  Coal  Co., 
L.  E.  7  Ch.,  730.  And  the  Appellate  Court  may  make 
a  decree  as  upon  a  trial  de  novo.  *  *  *  Upon  an 
appeal  to  the  House  of  Lords  the  respondent  cannot 
argue,  without  a  cross  appeal,  that  the  decree  below  was 
too  favorable  for  the  appellants.  Kellett  vs.  Kellett,  3 
H.  L.  Cas.,  161 ;  Yates  vs.  University  College,  L.  R.,  7 
H.  L.,  438. 

In  the  United  States,  as  a  general  rule,  the  ap- 
pellee cannot  be  heard  to  assign  error."  (See  cases 
ante}. 


—134— 

CASE  CONSIDERED  DE  NOVO. 

QUESTION. 

From  pages  4  to  10,  ante,  we  have  discussed  the  issue 
raised  by  the  pleadings  and  we  may  here  briefly  re-state  it 
thus: 

Have  the  seven  appellants  and  associates  using  different 
methods  of  holding  their  properties  and  carrying  on  business 
as  private  traders  conspired  or  combined  to  restrain  and  gain  a 
monopoly  of  interstate  and  international  commerce  by  means 
prohibited  by  the  Sherman  Act  ? 

We  have  so  far  endeavored  to  prove  that  the  Court  below 
was  in  error  in  finding : 

(1)  That  the  seven  individuals  controlled  all  the  ap- 
pellants. 

(2)  That  the  decree  as  entered, 

(a)  was  not  justified  nor  required  by  the  Northern 
Securities  case; 

(b)  that  the  mere  transfer  in  1899  of  properties 
justly  used  in  private  trade  to  the  Standard  Oil 
Co.  of  New  Jersey  was  not  a  violation  of  the 
Sherman  Act; 

(c)  That  the  decree  in  form  far  exceeded  the  power 
given  to  the  Court  sitting  in  Equity  by  the 
Sherman  Act. 

(3)  We  have  suggested  that  the  Government  not  having 
appealed  is  bound  by  the  decree  as  to  the  questions, 
of  fact. 

But  now 

(4)  We  propose  to  show  considering  the  case  de  nova 
that  it  is  without  merit,  and  the  petition  should  be 
dismissed. 


—135— 


IV. 


THE  THING  WHICH,  AND  THE  ONLY 
THING  WHICH,  THE  GOVERNMENT,  IN  ITS 
PETITION,  DOES  COMPLAIN  OF,  IS  THAT 
WE  WERE,  WHEN  THE  PETITION  WAS  FILED, 
THEN  RESTRAINING  AND  MONOPOLIZING  IN- 
TERSTATE AND  FOREIGN  TRADE  IN  OIL. 
WHATEVER  TRADE  THERE  THEN  WAS,  WAS 
DISTINCT  AND  INDEPENDENT  FROM  WHAT- 
EVER TRADE  THERE  HAD  BEEN  IN  1890.  THE 
GOVERNMENT  DOES  NOT  AND  CANNOT  COM- 
PLAIN OF  OUR  MONOPOLIZING  (WHICH  WE 
DENY)  THE  STATE  INDUSTRY  OF  PRODUC- 
ING AND  REFINING  OIL;  BUT  ONLY  THAT 
WHEN  THE  PETITION  WAS  FILED,  WE  WERE 
ACTUALLY  RESTRAINING  AND  BY  UNLAW- 
FUL MEANS  MONOPOLIZING  THE  THEN  IN- 
TERSTATE AND  FOREIGN  TRADE  IN  OIL. 


This  Brief,  in  support  of  the  foregoing  proposition,  dis- 
cusses and  maintains  the  following: 


(1)  The  fact  that  the  Standard  Oil  Company  of  New 
Jersey  when  the  petition  was  filed,  was  the  owner,  either  by 
direct  title  or  through  stock  ownership  where  the  legal  title 
was  vested  in  other  corporations,  of  certain  refineries,  pipe 
lines,  reservoirs,  tank  cars  and  other  property,  and  was  using 
them  all  under  one  ultimate  management  for  the  production 
or  purchase  of  crude  oil,  its  transportation  and  storage,  and 
the  refining  of  it  and  its  products,  and  the  sale  of  the  same, 
does  not  of  itself  violate  the  Sherman  Act.  The  appellants 
were  lawfully  entitled  to  so  hold  and  use  in  interstate  trade 


— 13G— 

such  combined  properties.  To  succeed  in  this  case,  the  Gov- 
ernment must  also  show  that  the  said  Standard  Oil  Company 
was  then  in  1906  using  its  power  to  actually  restrain  inter- 
state or  foreign  trade  in  oil,  or  was  then  in  190G  atempting 
to  or  was  by  illegal  means  excluding  others  from  said  trade 
and  attempting  to  monopolize  the  same,  or  a  part  thereof. 

(2)  That  the  Government's  case  depends  solely  and 
only  on  the  Sherman  Act,  which  Act  is  wholly  prospective 
and  not  at  all  retrospective.     That  the  Petition  asking  for 
equitable  relief  must  of  necessity  assert,  and  the  Government 
must  maintain,  that  when  the  Petition  was  filed  in  Novem- 
ber, 1906  (and  not  at  some  prior  time),  the  appellants  were 
then  actually  engaged  in  illegally  restraining  and  monopoliz- 
ing interstate  and  foreign  trade  in  oil,  contrary  to  the  pro- 
visions of  that  Act.     In  such  proceedings  as  this,  the  sole  and 
only  relief  the  Government  can  ask  is  to  prevent,  restrain  and 
prohibit  the  continuation  of  the  particular  things  which  are 
violations  of  the  Sherman  Act. 

(3)  This  case  involves,  and  only  involves,  the  ques- 
tion of  the  restraint  and  monopolization  of  inter-state  and 
foreign  trade  in  oil  in  November,  1906,  when  the  Petition 
was  filed;  it  does  not  involve  any  alleged  restraint  or  monop- 
oly of  the  oil  industry  in  any  of  the  States,  and  even  if  it 
had  been  proved  (which  it  has  not)  that  the  defendants  mo- 
nopolized the  production  and  refining  of  oil  in  each  of  the 
States  in  which  it  carried  on  business,  or  that  it  monopolized 
the  sale  of  oil  in  each  of  those  States   (which  it  has  not), 
these  would  in  no  way  aid  the  Government  in  the  mainten- 
ance of  the  present  suit,  which  involves  only  the  question  of 
the  violation  of  the  Federal  Statute,  which  statute  is  passed 
to  protect  only  interstate  and  foreign  trade. 

(4:)     Each  of  the  alleged  conspirators  in  this  case  as 
citizens  of  the  United  States  had  the  right  as  such  citizens 


—137— 

to  adopt  such  calling  or  trade  as  to  him  was  most  conducive 
to  the  exercise  of  his  liberty,  and  to  enter,  if  he  desired,  into 
interstate  and  foreign  trade;  and  having  adopted  such  trade 
or  industry,  it  became  his  property  just  as  much  as  if  he  had 
invested  his  money  in  a  parcel  of  real  estate.  Each  had  the 
right  to  follow  such  trade,  associate  himself  Avith  others,  and 
adopt  such  means,  as  the  formation  of  partnerships,  trusts 
and  corporations,  which  the  law  allowed  in  so  following; 
and  to  use  all  his  ingenuity,  skill  and  property  to  make  his 
business  a  success.  He  might  lawfully  enter  and  compete 
for  the  interstate  and  foreign  traffic;  there  is  no  federal  law 
which  limits  or  attempts  to  restrict  the  extent  to  which  he 
may  compete  for  that  interstate  and  foreign  traffic,  or  denies 
his  right  to  associate  others  with  him  in  partnerships  or  in 
corporations  or  so-called  trusts,  in  such  competition. 

(5)  The  federal  law  allowed  and  allows  each  of  the 
individuals  to  compete  freely  for  the  interstate  and  foreign 
traffic  in  oil  and  its  products.  He  may  use  all  the  weapons 
his  ingenuity  and  skill  can  suggest  to  wage  a  successful  war- 
fare. His  rights  to  compete  are  not  limited  to  merely  such 
as  are  fair  or  reasonable,  but  are  only  limited  by  such  as  are 
unlawful  and  directly  tend  to  the  violation  of  the  Sherman 
Act.  No  federal  law  has  or  does  restrict  such  competition 
by  saying  it  must  not  be  "unfair"  or  "undue"  or  "unreason- 
able," but  gives  the  widest  liberty  in  such  strife  and  limits 
the  means  only  by  forbidding  the  use  of  that  which  is  unlaw- 
ful. 

The  federal  law  also  allows  and  assures  to  each  com- 
petitor whatever  share,  however  large,  of  the  interstate  or 
foreign  trade  in  oil  he  or  they  may  win.  Provided  his  means 
are  not  unlawful,  he  may  win  all  he  can  of  such  trade,  even 
gain  a  temporary  monopoly  and  temporarily  fix  prices.  Such 


—138— 

monopoly  is  comparatively  harmless  if  the  future  trade  is 
left  open  to  competition. 

(6)  The  Sherman  Act  was  passed  to  protect  trade  and 
further  competition.  The  Act  does  not  forbid,  but  recog- 
nizes as  lawful,  combinations,  corporations,  and  trusts  en- 
gaged in  interstate  and  foreign  trade,  and  only  prohibits 
them  from  making  contracts  directly,  substantially  and  im- 
mediately restraining  such  trade  or  attempting  by  unlawful 
means  to  monopolize  the  same. 

It  makes  such  restraint  and  monopoly  a  crime  and  in- 
flicts, on  conviction,  severe  penalties  for  such  offense. 

It  does  not  limit  the  quantity  of  such  trade  any  one  or 
more  may  gain.  It  does  not  forbid  the  legitimate  growth 
of  lawful  business,  however  great  that  growth  may  be,  nor 
does  it  forbid  the  wealthiest  of  corporations  and  men  to  en- 
gage in  such  trade. 

It  permits  one  set  of  competitors  to  purchase  the  prop- 
erty of  other  competitors  solely  to  avoid  further  competi- 
tion. The  mere  size  of  the  competing  corporations  or  com- 
binations is  immaterial. 

In  addition  to  the  indictment  and  punishment,  and  dis- 
tinct from  it,  the  act  allows  the  courts,  on  petition  of  the  Gov- 
ernment, to  restrain,  prohibit  and  prevent  the  continuance  of 
acts  forbidden  by  said  act,  and  which  it  makes  crimes. 

To  sustain  the  present  petition,  the  Government  must 
clearly  prove : 

(1)  The  commission  by  appellants  of  a  crime. 

(2)  That   such  crime  was    actually   being  com- 
mitted when  the  petition  was  filed  in  November,  1906. 


—139— 

(7)  The  alleged  monopoly  that  is  complained  of   is 
not  in  the  ownership  of  the  oil  or  refineries  or  pipe  lines  them- 
selves, nor  in  the  production  or  refining  of  oil,  but  merely  in 
the  intangible,  shifting,  uncertain  thing  called  interstate  and 
foreign  trade  in  oil. 

The  monopoly  of  a  trade  at  common  law  was  forbidden 
because,  and  only  because,  it  excluded  all  others  from  prac- 
ticing such  trade,  and  seems  to  have  been  then  limited  to  a 
Royal  Grant,  as,  for  example,  giving  the  exclusive  right  to 
manufacture  playing  cars.  It  was  and  is,  a  distinct  thing 
from  engrossing,  regrating  or  forestalling  the  market,  all  of 
which  were  based  on  the  prevention  of  artificial  prices  for 
the  necessaries  of  life.  No  one  of  these  falls  under  Federal 
jurisdiction  but  each  is  subject  to  state  control  only.  To 
prove  a  monopoly  as  is  here  alleged,  the  Government  must 
show  that  the  monopoly  (using  the  word  in  its  popular  sense) 
was  created  by  unlawful  means  and  that  the  defendants,  when 
the  petition  was  filed,  were  using  unlawful  means  to  exclude 
others  from  the  trade. 

(8)  The   present   litigation    is    between   the    Federal 
Government  and  certain  of  its  citizens.     The  questions  in- 
volved are  solely  the  rights  of  these  Federal  citizens  and  the 
effect  upon  those  rights  of  the  Sherman  Act,  and  whether 
these  Federal  citizens  have  violated  the  provisions  of  that 
Act. 

The  violation  of  that  Act,  the  Act  itself  makes  a  crime, 
and  the  Government  must  prove  the  commission  of  such 
crime  by  acts  unlawful  under  Federal  laws. 

There  was  and  is  no  such  thing  as  a  Federal  crime, 
aside  from  express  Congressional  acts,  and  as  no  such  act  was 


—140— 

in  existence  prior  to  1890,  as  to  the  matters  charged  in  the 
petition,  all  the  matters  and  things  done  by  the  defendants 
prior  thereto  are  immaterial. 

(9)  The  character  of  the  oil  business  was  and  is  such 
that  a  great  corporation  was  and  is  an  economic  necessity  for 
carrying  on  that  industry ;  the  facts  in  this  case  and  the  his- 
tory of  the  development  of  the  oil  industry  prove  that  what 
is  commonly  called  the  Standard  Oil  Company  was  the  neces- 
sary means  by  which  the  industry  was  fostered  and  advanced, 
and  without  which  it  would  have  languished  and  been  much 
less  successful.     The  growth  and  success  of  the   Standard 
Oil   Company  was  the  result  of  the  individual   enterprise 
and  the  natural  laws  of  trade,  and  the  position  gained  by  it 
was  the  natural  result  of  the  lawful  use  of  competition  direct- 
ed  to  a  unique  and  unpar ailed  business  by  a  strong,  earnest, 
intelligent  group  of  men  with  abundant  capital,  where  the 
risks  and  the  uncertainty  of  the  business  justified  more  than 
usual  profits  in  the  handling  of  the  same.     It  was  not  the 
result  of  unlawful  means  but  of  skill,  unremitting  toil,  de- 
nials and  hardships,  where  continuous  use  of  skill,  labor  and 
capital  in  forty  years  reached  a  great  success. 

(10)  To  prove  a  violation  of  Section  one  of  the  Sher- 
man Act  the  Government  must  show  when  the  petition  was 
filed  that  we  were  then  by  contract  actually  restraining  inter- 
state trade  in  oil. 

To  prove  a  monopoly  under  Section  two  of  the  Sherman 
Act,  the  Government  must  show: 

(1)  That  the  appellants  were,  when  the  Petition  was 
filed,  then  using  unlawful  means  to  maintain  their 
control  of  the  industry. 

(2)  That  the  appellants  were  then  by  unlawful  means 
excluding  others  from  said  industry. 


—141— 


DISCUSSION. 

(i)  This  case  is  one  where  individual  citizens, 
being  the  joint  owners  of  private  non-competitive  prop- 
erties, are  using  the  same  in  private  trade. 

They  are  not  in  a  public  or  quasi  public  business.  Their 
business  is  confined  to  one  thing  only:  i.  e.,  crude  petroleum 
and  its  products.  They  are  producers,  manufacturers  and 
traders  in  it.  As  such,  their  rights  and  privileges  are  far 
different  from  that  of  competing  railroads  or  gas  companies 
or  businesses  or  occupations  impressed  with  a  public  duty. 
They  may  deal  with  whom  they  chose  and  refuse  to  deal  with 
others.  They  may  compete  for  the  whole  interstate  trade  in  oil 
and  lawfully  win.  The  extent  of  their  properties,  the  extent  of 
their  business,  the  eager  energetic  methods  with  which  it  is 
carried  on,  are  not  forbidden,  but  are  encouraged  by  the 
law.  The  partnerships,  limited  partnerships  and  corpora- 
tions through  which  they  work  are  all  private  traders,  and 
if  the  Petition  in  this  case  is  to  be  believed,  managed  and 
controlled  by  the  seven  individual  appellants. 

Their  pipe  line  system  is  an  indispensable  and  absolutely 
necessary  adjunct  to  their  refineries,  to  transport  to  them  the 
oiL  They  do  carry  principally  from  the  wells  to  their  reser- 
voirs or  tanks  oil  for  others;  but  this  is  a  distinct  and  com- 
paratively small  part  of  their  business,  and  does  not  char- 
acterize or  stamp  or  necessarily  connect  itself  with  their 
other  and  main  business  of  refining  crude  petroleum  and 
selling  the  refined  oil  and  its  by-products. 

The  consideration  of  the  case  should  begin  with  a  recog- 
nition of  these  facts,  and  the  acknowledgment  of  the  truth 


—142— 

that  such  cases  as  the  Trans-Missouri  Freight  Associa- 
tion, the  Joint  Traffic  Association  and  the  Northern  Securi- 
ties Company  are  entirely  different,  governed  by  different 
rules ;  and  to  consider  them  is  merely  to  mislead  as  the  North- 
ern Securities  case  did  the  Court  below. 

We  should  also  remember  that  the  Court  below  declined 
to  find  in  favor  of  the  Government  on  the  charges  in  the 
petition  of  fraud  and  unlawful  conduct  which  were  denied 
in  the  answer  and  on  which  issue  was  joined. 


(II)  This  case  only  involves  interstate  and  for- 
eign commerce;  and  limiting  even  the  word  "com- 
merce," I  further  state  that  this  case  only  involves  inter- 
state trade  in  oil  and  its  products.  I  include  in  the  word 
"trade  " 

(a)  the  article  traded  in  while,  but  only  while,  it  is 
in  actual  transit  from  one  state  to  another; 

(b)  the  bargaining  for  the  same  or  exchange  of  the 
articles ; 

(c)  The  transportation  from  one  state  to  another  of  the 
articles. 

All  three  of  these  make  up  the  interstate  and  foreign 
trade.  Such  trade  has  no  direct  relation  to  the  owner- 
ship of  the  article  traded  in,  but  solely  and  only  to  its 
presence  as  the  thing  transported  and  bargained  about.  When 
you  speak  of  interstate  trade,  you  mean  not  the  article  dealt 
in,  except  as  the  object  of  trade,  but  the  bargaining  for  the 
selling  of  and  the  transportation  of  that  article  between  the 
states. 

The  oil,  before  it  goes  into  interstate  trade,  is  not  under 
Congressional  control. 


—143— 

The  federal  Government  does  not  concern  itself  with 
how  one  acquired  the  article  put  into  interstate  trade. 

When  the  article  traded  in  has  been  joined  with  the 
general  mass  of  state  property,  it  has  passed  out  of  interstate 
trade,  and  no  matter  what  may  be  the  future  means  used  to 
gain  the  state  trade  in  that  article,  this  does  not  violate  the 
Sherman  Act  or  bring  it  under  federal  control. 

Anything  then  done  before  the  oil  got  into  interstate 
commerce,  or  after  it  got  out  of  interstate  commerce,  cannot 
Fe  a  violation  of  the  Sherman  Act. 


(Ill)  This  case  in  nowise  involves  any  question 
under  the  statutory  laws  of  any  of  the  States,  or  of  the 
common  law  of  any  of  the  States  in  reference  to  what 
constitutes  a  restraint  of  trade  or  a  monopoly  of  trade, 
or  any  policy  of  Ohio  or  Illinois.  No  matter  what  vio- 
lations there  may  or  may  not  have  been  of  State  laws 
or  of  the  common  law  of  any  one  of  the  States  as  to  re- 
straint of  trade  or  monopoly,  such  are  now  and  here 
wholly  unimportant. 

As  the  Supreme  Court  said  in  the  Knight  &  Co.  case, 

156  U.  S.,  10,  the 

"monopoly  and  restraint  denounced  by  the  Act  are  the 
monopoly  of  interstate  and  international  trade  or  com- 
merce/7 

and  not  of 

"a  monopoly  in  the  manufacture  of  a  necessity  of  life." 

This  case  does  not  involve  how  or  when  or  by  what  means 
the  appellants  acquired  their  title  to  all  their  properties; 
or  whether  in  any  respect  they  violated  any  of  the  State  laws 


•144- 


in  so  doing;  whether,  for  example,  in  any  State  they  gained 
a  monopoly  of  the  refining  business  or  the  pipe  line  business. 
All  these  things  are  matters  between  the  several  States  and 
the  appellants  and  not  between  the  United  States  and  the 
appellants. 

"The  power  of  the  State  to  impose  restraints  and 
burdens  on  persons  and  property  in  conservation,  and 
promotion  of  the  public  health,  good  order  and  pros- 
perity, is  a  power  originally  and  always  belonging  to  the 
States;  not  surrendered  by  them  to  the  general  Gov- 
ernment." 

Fuller,  C.  J.,  Lottery  case,  188,  U.  S.,  364. 

Douglass  vs.  Kentucky,  168  U.  S.,  488. 

U.  8.  vs.  E.  C.  Knight  &  Co..  156  U.  S.,  16. 

The  present  case  solely  and  only  involves  the  use  of 
products  of  that  property  in  the  interstate  trade,  and  while 
it  is  so  in  it.  Until  it  enters  into  the  interstate  trade, 
its  acquisition  and  ownership  are  matters  not  within  Federal 
jurisdiction. 

Fuller,  C.  J.,  said  in  the  Knight  Case,  156  U.  S.,  16, 
that  Congress  did  not  attempt  by  the  Sherman  Act  to 

"assert  the  power  to  deal  with  monopoly  directly  as  such ; 
or  to  limit  and  restrict  the  rights  of  corporations  created 
by  the  States  or  the  citizens  of  the  States  in  the  acquisi- 
tion, control  or  disposition  of  property;  *  *  *  or 
to  make  criminal  the  acts  of  persons  in  the  acquisition 
and  control  of  property  which  the  States  of  their  resi- 
dence or  creation  sanctioned  or  permitted." 

The  extent  to  which  Congress  may  control  the  ownership, 
is  not  here  for  discussion,  for  in  the  Sherman  Act  it  is  only 
sought  to  control — not  the  thing  itself — (except  where  it 


—145— 

authorizes  its  forfeiture)  but  contracts,  combinations,  con- 
spiracies and  monopolies  which  interfere  with  and  restrain 
free  open  trade  between  the  States.  In  this  suit  the  petition 
mentions  crude  oil  and  its  products.  It  alleges  violations 
only  of  the  Sherman  Act. 


The  sole  question  is: 

Are  the  appellants  violating  the  Sherman  Act;  and  the 
sole  statute  we  have  to  study  and  construe  is  the  Sherman 
Act.  Unless  the  Government  has  proved  that  when  the  peti- 
tion was  filed  the  appellants  were  then  actually  violating  the 
Sherman  Act,  its  case  fails. 

Let  me  assume  (what  is  not  a  fact)  that  the  appellants 
have  gained  a  monopoly  of  the  manufacture  of  refined  oil 
and  practically  control  the  refining  of  oil  in  different  States. 
Admittedly,  that  is  not  a  matter  of  which  this  Court  has 
jurisdiction,  or,  indeed,  can  have.  The  alleged  violation  of 
State  laws  or  the  formation  of  State  monopolies  or  the  crea- 
tion of  restraints  of  trade  inside  the  States  is  foreign  to  the 
discussion. 

This  case  does  not  involve  any  title  or  property  right  of 
the  appellants.  All  such  titles  and  property  rights  are  con- 
ferred and  governed  by  the  laws  of  the  several  States,  and 
over  those  cases  and  over  such  property  or  property  rights 
congress  has  no  control. 


In  the  Northern  Securities  Case,  Mr.  Justice  Harlan  said 
that  the  purchase  of  stock  in  a  State  corporation — the  acquisi- 
tion and  sale  of  property — were  under  State  control;  and 


—146— 

he  added  that  the  Federal  Courts  of  Federal  laws  could  not 
compel  the  dissolution  of  a  State  corporation. 

Northern  Securities  Case,  193  U.  S.,  19T. 

Kidd  vs.  Pearson,  128  U.  S.,  1. 

This  does  not  deny  that  to  determine  whether  the  ap- 
pellants have  violated  the  Sherman  Act  you  may  take  into 
consideration  all  the  facts  and  circumstances  in  the  case,  but 
it  does  deny  that  because  the  appellant  may  or  may  not  have 
used  in  different  instances  improper  methods  to  gain  State 
trade  or  properties,  you  can  infer  from  such  State  viola- 
tions that  the  defendants  violated  the  laws  for  interstate 
trade. 


(IV)  These  appellants  have  not  been  indicted  and 
are  not  being  tried  on  the  criminal  side  of  the  court  for 
something  HERETOFORE  done  in  violation  of  the 
Sherman  Act.  The  Sherman  Act  does  provide  penal- 
ties for  such  violation,  makes  the  crime  a  misdemeanor, 
and  declares  that,  on  conviction  thereof,  certain  punish- 
ments shall  be  inflicted.  That  portion  of  the  Act  is  the 
criminal  portion,  and  clearly  indicates  a  trial  in  the 
methods  assured  to  the  individual  by  the  Constitution 
of  the  United  States.  Such  a  trial,  under  the  Federal 
Constitution,  Article  III,  must  be  by  jury;  the  proof 
would  have  to  be  beyond  a  reasonable  doubt ;  the  charge 
would  be  a  prior  well-defined  act ;  and  the  results  would 
have  far  other  and  different  consequences  than  under 
the  present  case. 

In  one  sense,  indeed,  the  two  distinct,  independent 
provisions  of  the  Act,  i.  e.,  punishment  for  a  crime  already 
committed  and  prevention  of  further  commission  of  a  con- 
tinuing crime — have  close  connection  with  each  other ;  for  to 


—147— 

find  an  indictment  on  the  criminal  side  as  well  as  to  file  a 
petition  on  the  civil  side,  requires  proof  of  the  identical 
crime.  The  difference  is  that  on  the  criminal  side  you  refer 
solely  to  the  past,  while  on  the  civil  side  you  refer  solely  to 
the  present. 


The  Sherman  Act  is  a  Criminal  Statute. 

United  States  vs.  Freight  Association,  58  Fed.  58,  77, 
Sanborn,  J. : 

"The  Anti-Trust  Act  is  a  criminal  statute/' 

Northern  Securities  Company  vs.  United  States,  193  U. 
S.,  197,  401,  Holmes,  J. : 

"The  statute  of  which  we  have  to  find  the  meaning 
is  a  criminal  statute.  The  two  sections  on  which  the 
Government  relies  both  make  certain  acts  crimes.  That 
is  their  immediate  purpose,  and  that  is  what  they  say. 
It  is  vain  to  insist  that  this  is  not  a  criminal  proceeding. 
The  words  cannot  be  read  one  way  in  a  suit  which  is  to 
end  in  fine  and  imprisonment,  and  another  way  in  one 
which  seeks  an  injunction/' 

As  the  thing  charged  is  a  crime,  it  is  by  no  means  cer- 
tain that  the  Government  should  not  prove  its  case  beyond  a 
reasonable  doubt. 

In  considering  the  degree  of  proof,  the  Supreme  Court 
of  Missouri  said  in  State  vs.  Continental  Tobacco  Co.,  177 
Missouri,  page  1 : 

"However,  it  must  be  remembered  that  this  pro- 
ceeding partakes  of  the  nature  of  a  criminal  prosecution, 
severe  penalties  are  imposed;  hence,  it  is  not  sufficient 


—148— 

to  warrant  a  finding  adverse  to  respondents,  that  we  may 
entertain  strong  suspicions,  or  even  strong  probabilities, 
of  their  guilt. 

Such  conclusion  should  only  be  reached  upon  a 
clear  showing  of  the  testimony,  fully  satisfying  the  minds 
of  the  Court  that  they  were  guilty  of  the  violations  of 
the  law  as  charged  in  the  information." 

The  Sherman  Act  has  no  retroactive  effect,  but  is 
prospective  only. 

The  Supreme  Court  said  in  the  Trans-Missouri  Case, 
166  U.  S.,  342,  that 

"there  can  be  no  question  of  any  act  being  regarded  as 
a  violation  of  the  statute  which  occurred  before  it  was 
passed." 


In  Deuber  Watch  Company  case,  66  Fed.  Rep.,  637,  641, 
the  Circuit  Court  of  Appeals  said  that  the  only  acts  that  the 
plaintiff  could  contend  were  forbidden  by  the  Sherman  Act 

(<are  those  done  after  its  passage/' 


(V)  That  the  case  involves  the  Sherman  Act 
only,  and  not  some  supposed  Federal  common  law,  and 
is  governed  and  must  be  determined  solely  by  the  Act, 
seems  perfectly  plain. 

The  petition's  prayers  for  relief  are  only  under  the 
Sherman  Act. 

Thus  the  first  prayer  is  that  the  Court  decree  that  the 
acts  done  are 

"in  violation  of  the  Act  of  Congress  of  July  2nd,  1890, 
entitled  'An  Act  to  protect  trade  and  commerce  against 
unlawful  restraints  and  monopolies.'7 


— -149— 

The  second  prayer  is  for  a  decree  that  the  individual 
defendants 

"in  violation  of  the  provisions  of  Sections  1  and  2  re- 
spectively of  the  said  Act  of  Congress,  approved  July 
2nd,   1890,  entered  into  an  agreement,"  etc. 
The  third  prayer  is  that  the  holdings  etc.,  be  decreed 
"to  be  in  violation  of  said  Act  of  Congress." 

So  each  of  the  other  prayers  is  based  solely  on  the  Sher- 
man Act. 

There  is  no  other  federal  statute  authorizing  the  filing 
of  such  a  petition,  or  giving  the  extraordinary  power  to  a 
court  of  equity  to  restrain  the  commission  of  a  crime  in 
such  cases  as  alleged  in  the  petition. 

The  prayer  that  the  acts  done  under  the  alleged  con- 
spiracy 

"are  in  derogation  of  the  common  rights  of  all  the  people 

of  the  United  States" 

is  probably  rhetorical  and  so  intended,  because  no  one  could 
suppose  this  court  had  such  power. 

The  Wilson  Act  merely  refers-  to  imports  from  foreign 
nations,  and  not  to  interstate  or  foreign  export  trade,  and 
therefore  has  no  application  to  this  case. 


In  the  Addyston  Pipe  Case,  78  Fed.  Rep.,  712,  where 
the  United  States  filed  the  petition,  the  Court  said : 

"In  a  suit  such  as  this  in  the  name  of  the  United 
States  jurisdiction  depends  alone  upon  the  (Sherman) 
Act." 

Not  upon  any  alleged  Federal  common  law,  but  solely 
upon  the  Sherman  Act. 


—150— 


(VI)  The  size  or  magnitude  of  a  business  is  not 
controlled  by  the  Sherman  Act,  and  therefore  the  size 
of  the  Standard  Oil  Company,  its  large  properties,  re- 
sources and  power  are  just  as  lawful  under  the  Sherman 
Act  as  if  it  owned  one  refinery  instead  of  eighteen,  or 
one  mile  of  pipe  line  instead  of  thousands. 


The  Court  below  so  ruled : 

"  *  *  *  monopolies  of  part  of  interstate  and  inter- 
national commerce  by  legitimate  competition,  however 
successful,  are  not  denounced  by  the  law  and  may  not  be 
forbidden  by  the  Courts."  (Rec,  A,  p.  585). 


Judge  Hook  said : 

"Magnitude  of  business  does  not  alone  constitute  a 
monopoly,  nor  effort  at  magnitude  an  attempt  to  monop- 
olize." (Rec.  A,  p.  589). 


And  again  Judge  Hook  said  (Rec.  A,  p.  590)  : 

"Success  and  magnitude  of  business,  the  rewards 
of  fair  and  honorable  endeavor,  were  not  among  the 
evils  which  threatened  the  public  welfare  and  attracted 
the  attention  of  Congress." 


In  the  Northern  Securities  Case  (193  U.  S.,  407), 
Justice  Holmes  said,  speaking  of  the  size  of  the  corporation 
or  its  wealth  or  power : 

"*  *  *  the  act  of  Congress  makes  no  discrimination 
according  to  size.  Size  has  nothing  to  do  with  the  mat- 
ter." 


—151— 

In  United  States  vs.  American  Tobacco  Company,  164 
Fed.,  700,  709,  Judge  Coxe  said: 

"It  has  never  been  held  that  the  mere  fact  that  a 
business  is  large  and  is  extended  over  a  wide  territory 
renders  its  promoters  amenable  to  the  statute.  Success 
is  not  a  crime." 

United  States  vs.  American  Naval  Stores  Co..  172  Fed., 
455,  458,  459,   (So.  Dist.  Ga.,  May  12,  1909)  : 

District  Judge  Sheppard,  charging  the  jury  in  an  in- 
dictment under  Sections  One  and  Two  of  the  Sherman  Act: 
<i#  *  *  the  essence  of  the  monopoly  'is  found  not 
so  much  in  the  creating  of  a  very  extensive  business  in 
the  hands  of  a  single  control.'  The  size  of  a  business 
is  not  in  itself  a  violation  of  this  law,  and  should  carry 
with  it  no  great  weight  in  considering  the  second  count 
(under  section  two)  of  the  indictment.  The  criminal 
act  in  the  statute  is  the  certain  and  necessary  prevention 
of  all  other  persons  from  engaging  in  such  business,  and 
thereby  stifling  competition.  The  evil  is  not  the  enlarge- 
ment of  the  trade  of  one  person  or  corporation,  but  the 
destruction  of  the  trade  of  all  other  persons  in  the  same 
commodity." 

Commissioner  Smith,   of  the  Bureau  of  Corporations, 
says  in  his  report: 

"Corporate  combination,  as  such,  appears  to  be  not 
only  an  economic  necessity,  but  also  largely  an  accom- 
plished fact.  It  is  not  the  existence  of  in- 
dustrial power,  but  rather  its  misuse,  that  is  the  real 
problem.  *  Corporate  methods,  not  corporate 
existence,  is  the  question  at  issue.  The  Government 
should  direct  its  attention  toward  preventing  such  unfair 
methods,  and  toward  keeping  open  the  opportunities  for 
competition  in  industry." 


—152— 

This  idea  is  very  clearly  expressed  by  Judge  Jackson  In 
Re  Greene,  52  Fed.,  104,  115: 

"It  is  very  certain  that  Congress  could  not,  and 
did  not,  by  this  enactment,  attempt  to  prescribe  limits 
to  the  acquisition,  either  by  the  private  citizen  or  state 
corporation,  of  property  which  might  become  the  sub- 
ject of  interstate  commerce,  or  declare  that,  when  the 
accumulation  or  control  of  property  by  legitimate  means 
and  lawful  methods  reached  such  magnitude  or  propor- 
tions as  enabled  the  owner  or  owners  to  control  the  traffic 
therein,  or  any  part  thereof,  among  the  states,  a  criminal 
offense  was  committed  by  such  owner  or  owners.  All 
persons,  individually  or  in  corporate  organizations, 
carrying  on  business  avocations  and  enterprises,  involv- 
ing the  purchase,  sale  or  exchange  of  articles,  or  the  pro- 
duction and  manufacture  of  commodities,  which  form 
the  subjects  of  commerce,  will,  in  a  popular  sense,  mo- 
nopolize both  state  and  interstate  traffic  in  such  articles 
or  commodities  just  in  proportion  a*s  the  owner's  busi- 
ness is  increased,  enlarged  and  developed.  But  the  mag- 
nitude of  a  party's  business,  production  or  manufacture, 
with  the  incidental  and  indirect  powers  thereby  acquired, 
and  with  the  purpose  of  regulating  prices  and  controlling 
interstate  traffic  in  the  articles  or  commodities  forming 
the  subject  of  such  business,  production  or  manufacture, 
is  not  the  monopoly  or  attempt  to  monopolize,  which  the 
statute  condemns." 

In  re  Corning,  51  Fed.,  205,  211: 

"From  these  debates  it  is  evident  that  the  Con- 
gress did  not  intend  to  limit  the  amount  of  capital  a 
citizen  should  invest  in  any  line  of  business,  or  restrain 
his  energy  or  enterprise  in  acquiring  for  himself  all  the 
trade  possible  in  such  business,  provided  in  doing  so  he 
did  not,  by  illegal  contract  or  devices,  restrain  others 
from  pursuing  the  same  business,  or  deprive  the  public 


—153— 


from  enjoying  the  advantage  of  the  free  use  of  capital, 
skill  and  experience  of  competitors." 


In  Eddy  on  Combinations,  Sec.  177 : 

"The  magnitude  of  the  combination  has  a  direct 
bearing  upon  the  power,  but  not  upon  the  character  of 
the  combination.  The  legality  of  a  combination  is  not 
determined  by  the  extent  of  its  power  or  influence." 


The  Supreme  Court  of  Illinois  in  Coquard  vs.  National 
Linseed  Oil  Company,  117  111.,  480,  484,  said : 

"About  the  only  fact,  however,  averred  in  the  bill 
which  might  constitute  a  part  of  the  facts  necessary  to 
show  a  trust  is  that  the  defendant  has  acquired  a  great 
many  oil  mills  and  plants,  and  is  managing  a  large  busi- 
ness. The  facts  pleaded  are  insufficient  to  show  the 
existence  of  a  trust." 


In  the  Mogul  Steamship  Case,  L.  R,  23  Q.  B.,  598, 
Lord  Justice  Bowen  said  (p.  618V. 

"It  is  perfectly  legimate,  as  it  seems  to  me,  to 
combine  capital  for  all  the  mere  purposes  of  trade  for 
which  capital,  apart  from  combination,  may  be  legi- 
mately  used  in  trade.  To  limit  combinations  of  capital 
when  used  for  purpose  of  competition  in  the  manner 
opposed  by  the  arguments  of  the  plaintiffs,  would  in  the 
present  day  be  impossible — would  be  only  another 
method  of  attempting  to  set  boundaries  to  the  tides." 


—154- 


(VII)  The  Sherman  Act  does  not  prohibit  in  pri- 
vate trade,  but  recognizes  as  lawful,  the  association  of 
individuals  as  joint  owners — partners — or  in  corporate 
form  or  trust  form,  to  hold  and  use  properties  and  en- 
gage in  interstate  trade  and  commerce. 


Read  the  Act  and  this  point  is  demonstrated: 

Section  1  does  not  prohibit 

"combinations  in  the  form  of  trust  or  otherwise/' 
but  only  prohibits  them  when  they  are 

"in  restraint  of  trade  or  commerce  among  the  sev- 
eral states." 

Section  Two  does  not  denounce  either  trusts  or 
partnerships  or  corporations  or  joint  owners  from  en- 
gaging in  interstate  commerce,  but  only  pre\ents  them 
when  they 

"combine  or  conspire" 

"to  monopolize  any  part  of  the  trade  or  commerce 

among  the  several  states." 

Section  8  defines  "person" 

"to  include  corporations  and  associations  existing 
under  or  authorized  by  the  laws  of  either  the 
United  States,  the  laws  of  any  Territory,  or  the 
laws  of  a  foreign  country." 

In  the  United  States  vs.  Joint  Traffic  Association,  171 
U.  S.,  505,  Mr.  Justice  Peckham  said  (567) : 

"*  *  *  we  might  say  that  the  formation  of  cor- 
porations for  business  or  manufacturing  purposes  has 
never,  to  our  knowledge,  been  regarded  in  the  nature 
of  a  contract  in  restraint  of  trade  or  commerce.  The 
same  may  be  said  of  the  contract  of  partnership." 


Chesapeake  &  Ohio  Fuel  Co.  vs.  United  States,  115  Fed., 
610,  620,  Day,  Circuit  Judge: 

"Looking,  then,  to  the  contract  in  question,  we  find 
fourteen  of  the  coal  producers  whose  aggregate  produc- 
tion is  five  thousand  tons  a  day,  entering  into  an  agree- 
ment which,  without  making  a  partnership,  undertakes 
to  control  the  entire  output  of  the  several  mines." 


Northern  Securities  Co.  vs.  United  States,  193  U.  S., 
197,  410,  Holmes,  J. : 

"A  partnership  is  not  a  contract  or  combination 
in  restraint  of  trade  between  the  partners  unless  the 
well-known  words  are  to  be  given  a  new  meaning  in- 
vented for  the  purpose  of  this  act." 

Oalcdale  Manufacturing  Co.  vs.  Garst,  18  R.  L,  484; 
23  L.  E.  A.,  639 : 

"It  does  not  follow  that  every  combination  in  trade 
even  though  such  combination  may  have  the  effect  to 
diminish  the  number  of  competitors  in  business,  is  there- 
fore illegal.  Such  a  rule  would  produce  greater  public 
injury  that  that  which  it  would  seek  to  cure.  It  would 
be  impracticable.  It  would  forbid  partnerships  and 
sales  by  those  engaged  in  a  common  business.  It  would 
cut  off  consolidation  to  secure  the  advantages  of  united 
capital  and  economy  of  administration.  It  would  pre- 
vent all  restrictions  and  exclusive  privileges  and  ham- 
per the  familiar  conduct  of  commerce  in  many  ways. 
There  may  be  many  such  arrangements  which  will  be 
beneficial  to  the  parties,  and  not  injurious  to  the  pub- 
lic. Mononpolies  are  liable  to  be  oppressive,  and  hence 
are  doomed  to  be  hostile  to  the  public  good.  But  com- 
binations for  mutual  advantage,  which  do  not  amount 
to  a  monopoly,  but  leave  the  field  of  competition  open 


—156— 

to  others,  are  neither  within  the  reason  nor  the  operation 
of  the  rule." 

In  Deuber  Watch  Case  Co.  vs.  Howard  Watch  Co., 
66  Fed.,  637,  643,  Judge  Lacombe,  for  the  Circuit  Court  of 
Appeals,  said: 

"The  total  amount  of  any  given  commodity  which 
will  be  purchased  by  a  community  is  limited,  and  when 
several  sellers  of  such  commodity  enter  into  a  combina- 
tion in  the  form  of  a  partnership,  and  by  ingenious  ad- 
vertising, or  by  competition,,  or  by  the  offer  of  favorable 
terms  to  buyers,  enlarge  their  own  trade  in  such  com- 
modity, they  restrain  to  some  extent  the  trade  of  one 
or  more  of  their  competitors  therein.  But  no  one,  not 
even  the  plaintiff-in-error,  contends  that  the  statute  for- 
bids any  such  acts,  although,  if  the  words  be  taken  with 
absolute  literalness,  the  phrase  'restraint  of  trade'  is 
broad  enough  to  cover  them." 

In  re  Greene,  52  Fed.,  104,  Judge  Jackson  (p.  115)  : 

"It  is  very  certain  that  Congress  could  not  and  did 
not,  by  this  enactment,  attempt  to  prescribe  limits  to  the 
acquisition,  either  by  private  citizen  or  state  corpora- 
tion, of  property  which  might  become  the  subject  of  in- 
terstate commerce,  or  declare  that,  when  the  accumula- 
tion or  control  of  property  by  legitimate  means  and  law- 
ful methods  reached  such  magnitude  or  proportions  as 
enabled  the  owner  or  owners  to  control  the  traffic  there- 
in, or  any  part  thereof,  among  the  States,  a  criminal 
offense  was  committed  by  such  owner  or  owners. 
*  *  *  (p.  112)  Congress  may  place  restrictions 
and  limitations  upon  the  right  of  corporations  created 
and  organized  under  its  authority  to  acquire,  use  and  dis- 
pose of  property.  It  may  also  impose  such  restrictions 
and  limitations  upon  the  citizen  in  respect  to  the  exer- 


—157— 

else  of  a  public  privilege  or  franchise  conferred  by  the 
United  States.  But  Congress  certainly  has  not  the 
power  or  authority  under  the  Commerce  clause,  or  any 
other  provision  of  the  constitution,  to  limit  and  restrict 
the  right  of  corporations,  created  by  the  States,  or  the 
citizens  of  the  States,  in  the  acquisition,  control  and  dis- 
position of  property/' 


Northern  Securities  Co.  vs.  United  States,  193  U.  S., 
197,  361,  Brewer,  J. : 

"Further,  the  general  language  of  the  Act  is  also 
limited  by  the  power  which  each  individual  has  to  man- 
age his  own  property  and  determine  the  place  and  man- 
ner of  its  investment.  Freedom  of  action  in  these 
respects  is  among  the  inalienable  rights  of  every  citi- 
zen/' 


In  Smiley  vs.  Kansas,  196    U.    S.,    147,    Mr.    Justice 
Brewer  said  (456,  457)  : 

" Undoubtedly  there  is  a  certain  freedom  of  con- 
tract which  cannot  be  destroyed  by  legislative  enact- 
ment. In  pursuance  of  that  freedom,  parties  may  seek 
to  further  their  business  interests,  and  it  may  not  be 
always  easy  to  draw  the  line  between  those  contracts 
which  are  beyond  the  reach  of  the  police  power,  and 
those  which  are  subject  "to  prohibition  or  restraint.  But 
a  secret  arrangement  by  which,  under  penalties,  an  ap- 
parently existing  competition  among  all  the  dealers  in 
a  community  in  one  of  the  necessaries  of  life  is  sub- 
stantially destroyed  without  any  merging  of  interests 
through  partnerships  or  incorporations,  is  one  to  which 
the  police  power  extends." 


—158— 


(VIII)  The  Sherman  Act  was  passed  to  further 
trade,  and  any  private  trader  may  lawfully  join 
with  him  any  competitive  private  trader,  or  buy  his  busi- 
ness and  property  and  include  such  property  and  busi- 
ness with  his  own. 


We  turn  again  to  the  words  of  the  Sherman  Act — 

Nowhere  in  it  is  there  any  prohibition  of  the  joining  of 
any  two  or  more  together  as  partners  or  joint  owners,  or  in 
corporate  form  to  carry  on  business.  There  is  no  word 
prohibiting  the  joining  of  a  competitor  or  the  purchase  of 
his  business  or  property.  On  the  contrary,  the  words  of 
Sections  One,  Two  and  Eight,  by  plain  implication,  so  allow. 

And  such  is  also  the  result  of  the  cases  under  it. 


It  is  not  illegal  under  the  Sherman  Act  for  individ- 
uals to  buy  up  the  properties  and  business  of  competi- 
tors. 

Northern  Securities  Co.  vs.  United  States,  197  U.  S., 
361,  Brewer,  J.: 

"Further,  the  general  language  of  the  Act  is  also 
limited  ~by  the  power  which  each  individual  has  to  man- 
age his  own  property  and  determine  the  place  and  man- 
ner of  its  investment.  Freedom  of  action  in  these  re- 
spects is  among  the  inalienable  rights  of  every  citizen. 
If,  applying  this  thought  to  the  present  case,  it  appeared 
that  Mr.  Hill  was  the  owner  of  a  majority  of  the  stock 


—159— 

in  the  Great  Northern  Railway  Company,  he  could  not 
by  any  acts  of  Congress  be  deprived  of  the  right  of  in- 
vesting his  surplus  means  in  the  purchase  of  the  stock 
of  the  Northern  Pacific  Railway  Company,  although 
such  purchase  might  tend  to  vest  in  him  through  that 
ownership  a  control  over  both  companies.  In  other 
words,  the  right  which  all  other  citizens  have  of  purchas- 
ing Northern  Pacific  stock  could  not  be  denied  to  him 
by  Congress,  because  of  his  ownership  of  stock  in  the 
Great  Northern  Company.  Such  was  the  ruling  in 
Pearsall  vs.  Great  Northern  Railway,  161  U.  S.  646,  in 
which  this  Court  said  (p.  671),  in  reference  to  the  right 
of  the  stockholders  of  the  Great  Northern  Company  to 
purchase  the  stock  of  the  Northern  Pacific  Railway  Com- 
pany. 'Doubtless  these  stockholders  could  lawfully  ac- 
quire by  individual  purchases  a  majority,  or  even  the 
whole  of  the  stock  of  the  re-organized  company;  and 
thus  possibly  obtain  its  ultimate  control;  but  the  com- 
panies would  still  remain  separate  corporations,  with  no 
interests,  as  such,  in  common.' ' 


See  Mr.  Justice  Holmes  to  the  same  effect: 

Northern  Securities  Case,  193  U.  S.,  409. 

Smiley  vs.  Kansas,  196  U.  S.,  457. 
In  re  Greene,  52  Fed.,  104. 


Davis  vs.  Booth,  131  Fed.,  566: 
The  Court  (Severeiis,  J.)  said  (p.  37)  : 

"It  may  be  that  the  practice  of  acquiring  by  a 
single  corporation,  through  purchase  of  a  great  number 
of  single  plants  in  several  states,  of  power  to  control 


— -160— 

the  market  of  a  given  commodity  in  a  wide  area  of  terri- 
tory, may  become  injurious  to  the  public;  but  if  so,  it 
would  seem  that  the  limitations  and  the  means  for  the 
restriction  and  correction  required  must  be  supplied 
by  the  lawmaking  power,  since  the  old  law  against  fore- 
stalling the  market  has  become  obsolete." 
Certiorari  denied,  by  U.  S.  Supreme  Court,  Per  Curiam. 
195  U.  S.,  636. 

Robinson  vs.  Brick  Company,  127  Fed.,  804 

(C.  C.  A.) 

A  number  of  competing  brick  plants  in  West  Virginia 
and  Ohio  agreed  to  sell  their  plants  to  one  corporation  and 
gave  restrictive  covenants.  Afterwards  in  attempting  to 
enforce  these  covenants,  the  Court  overruled  a  defense  that 
the  whole  transaction  was  void,  inter  alia,  under  the  Sher- 
man Act. 

Cincinnati  Packet  Co.  vs.  Bay,  200  U.  S.,  179. 
The  Packet  Company  had  bought  up  a  number  of  rival 
packet  companies  on  the  Ohio  River  trading  between  Cin- 
cinnati, Portsmouth  and  the  intervening  towns  in  Ohio  and 
Kentucky.  In  attempting  to  enforce  a  restrictive  covenant 
contained  in  the  agreement  of  sale  it  was  objected  that  the 
whole  transaction  was  void  under  the  Sherman  Act. 

The  Court,  Mr.  Justice  Holmes,  seemingly  assuming 
that  the  purchases  were  not  illegal,  held  that  whatever  re- 
straint of  trade  resulted  from  the  competitors  going  out  of 
business  was  incidental  and  remote. 

United  States  vs.  Joint  Traffic  Association,  171  U. 
S.,  505,  567. 

"We  are  not  aware  that  it  has  ever  been  claimed 
that  a  lease  or  purchase  by  a  farmer,  manufacturer  or 


—161— 

merchant  of  an  additional  farm,  manufactory  or  shop, 
or  the  withdrawal  from  business  of  any  farmer,  mer- 
chant or  manufacturer,  restrained  commerce  or  trade 
within  any  legal  definition  of  that  term.  And  the  sale 
of  the  good  will  of  a  business  with  an  accompanying 
agreement  not  to  engage  in  a  similar  business  was  in- 
stanced in  the  Trans-Missouri  case  as  a  contract  not 
within  the  meaning  of  the  Act;  and  it  was  said  that 
such  a  contract  was  collateral  to  the  main  contract  of 
sale,  and  was  entered  into  for  the  purpose  of  enhancing 
the  price  at  which  the  vendor  sells  his  business." 

United  States  vs.  Addyston  Pipe  &  Steel  Company, 
85  Fed.,  271. 

Among  the  agreements  which  Judge  Taft  in  the  above 
case  cited  as  being  perfectly  valid  both  at  common  law  and 
under  the  Act  of  1890  was  a  restrictive  covenant  by  a  seller 
of  a  competing  business  that  he  would  not  engage  in  busi- 
ness to  the  injury  of  the  good  will  sold.    And  he  said  (280)  : 
"It  was  of  importance,  as  an  incentive  to  industry 
and  honest  dealing  and  trade,  that,  after  a  man  had 
built   up   a  business  with   an   extensive   good  will   he 
should  be  able  to  sell  his  business  and  good  will  to  the 
best  advantage,  and  he  could  not  do  so  unless  he  could 
bind  himself  by  an  enforceable  contract  not  to  engage  in 
the  same  business  in  such  a  way  as  to  prevent  injury  to 
that  which  he  was  about  to  sell." 

In  Dolph  vs.  Troy  Laundry  Machinery  Co.,  28  Fed., 
553,  555,  Judge  Wallace  said: 

"It  is  not  obnoxious  to  good  morals,  or  to  the  rights 
of  the  public,  that  two  rival  traders  agree  to  consolidate 
their  concerns,  and  that  one  shall  discontinue  business, 


—162— 

and  become  a  partner  with  the  other,  for  a  specified 
term.  It  may  happen,  as  the  result  of  such  an  arrange- 
ment, that  the  public  have  to  pay  more  for  the  com- 
modities in  which  the  parties  deal;  but  the  public  are 
not  obliged  to  buy  of  them.  Certainly,  the  public  have 
no  right  to  complain,  so  long  as  the  transaction  falls  short 
of  a  conspiracy  between  the  parties  to  control  prices  by 
creating  a  monopoly." 

U.  8.  vs.  Knight  &  Co.,  156  U.  S.,  1. 

National  Benefit   Company  vs.    Union  Hospital  Com- 
pany, 45  Minn.  272  (11  L.  E.  A.,  437,  440)  Mitchell,  J.: 
"The  general  concensus  of  all  the  authorities,  at 
least  the  later  ones,  is     *     *     *     that    a    party    may 
legally  purchase  the  business  and  trade  of  another  for 
the  very  purpose  of  removing  or  preventing  competition." 

Diamond  Match  Company  vs.  Roeber,  106  N.  Y.,  473, 
843: 

"We  suppose  a  party  may  legally  purchase  the  trade 
and  business  of  another  for  the  very  purpose  of  prevent- 
ing competition." 

Trenton  Potteries   Company   vs.    Oliphant,   58   N".    J. 
Eq.  507  (46  L.  K.  A.  255,  263) : 

UA  person  engaged  in  any  manufacture  or  trade, 
having  the  right  to  acquire  and  possess  property,  and 
to  do  with  it  what  he  chooses,  may  lawfully  buy  the 
business  of  any  of  his  competitors.  His  first  purchase 
would  at  once  diminish  competition.  If  he  continued 
to  purchase,  each  succeeding  transaction  would  remove 
another  competitor.  If  his  capital  was  large  enough 
to  enable  him  to  buy  the  business  of  all  competitors, 


—163— 

the  last  purchase  would  completely  exclude  competition, 
at  least  for  a  time.  But  in  the  absence  of  legislative 
restrictions,  if  such  could  be  imposed,  upon  the  ac- 
quisition of  such  property,  and  its  use  when  so  acquired 
courts  could  impose  no  limitation  It  fol- 

lows that  a  corporation  empowered  to  carry  on  a  par- 
ticular business  may  lawfully  purchase  the  plant  and 
business  of  competitors,  although  such  purchases  may 
diminish,  or,  for  a  time  at  least,  destroy,  competition." 

See  the  very  late  opinion  of  Judge  Lurton  in  the  Calu- 
met and  Hecla  Company  Case.  (Ante,  p.  110). 


(IX)  To  prove  that  the  appellants  conspired  to 
or  did  monopolize  a  whole  or  part  of  the  inter-state 
trade  in  oil,  the  Government  must  prove  that  the  appel- 
lants 

(1)  Conspired  to  obtain  control  of  such  trade  by  ex- 
cluding all  others  from  it. 

(2)  Conspiracy  to  do  this  by  the  use  of  unlawful  means. 

(3)  If  a  combination  did  exist,  and  the  appellants  ac- 
tually gained  such  a  monopoly  by  lawful  means, 
through  the  legitimate  growth  and  development  of 
its  business,  and  by  the  lawful  use  of  competition, 
then  they  were  not  guilty  of  a  violation  of  the  Sher- 
man Act — even  though  they  excluded  to  some  extent 
others  from  such  business. 

In  other  words: 

A  lawful  monopoly  may  be  gained  under  the  Sher- 
man Act. 

The  Court  below  so  ruled  in  this  case  (Rec,  A,  p.  585)  : 
"  *  *  *  Monopolies  of  part  of  interstate  and  in- 


—164— 

ternational  commerce  by  legitimate  competition,  how- 
ever successful,  are  not  denounced  by  the  law  and  may 
not  be  forbidden  by  the  Courts.'' 


See  also  Judge  Hook's  opinion. 

Justice  Holmes,  193  IT.  S.,  408. 
Judge  Putman,  55  Fed.,  640. 
Judge  Sanborn,  125  Fed.,  454. 


It  is  only  the  monopoly  gained  by  using  unlawful  means, 
and  thus  excluding  others  from  the  trade,  that  the  Sherman 
Act  condemns. 

In  the  opinion  of  the  lower  Court  in  this  case  Judge 
Sanborn  said  of  the  Sherman  Act  (Kec.  A-585)  : 

"Its  true  construction  is  that  while  unlawful  means 
to  monopolize  and  to  continue  an  unlawful  monopoly  of 
interstate  and  international  commerce  are  misdemeanors 
and  enjoinable  under  it,  monopolies  of  part  of  inter- 
state and  international  commerce,  by  legitimate  com- 
petition, However  successful,  are  not  denounced  by  the 
law." 


And  in  his  concurring  opinion  Judge  Hook  said  (Rec. 
A-589,  590)  : 

"Magnitude  of  business  does  not,  alone,  constitute 
a  monopoly,  nor  effort  at  magnitude  an  attempt  to  mo- 
nopolize. To  offend  the  act  the  monopoly  must  have 
been  secured  by  methods  contrary  to  the  public  policy  as 
expressed  in  the  statutes  or  in  the  common  law. 

"Success  and  magnitude  of  business,  the  rewards 
of  fair  and  honorable  endeavor,  were  not  among  the  evils. 


—165— 

which  threatened  the  public  welfare  and  attracted  the 
attention  of  Congress.  But  when  they  have  been  obtained 
by  wrongful  or  unlawful  methods,  and  competition  has 
been  crippled  or  destroyed,  the  elements  of  monopoly 
are  present." 

This  Court  said  in  National  Cotton  Oil  Co.  vs.  Texas, 
197  U.  S.,  129,  that  a  monopoly  is  now 

"understood  to  include  'a  condition  produced  by  the 
acts  of  mere  individuals. ?  Its  dominant  thought  now 
is,  to  quote  another,  'the  notion  of  exclusiveness  or 
unity;7  in  other  words,  the  suppression  of  competition 
by  the  unification  of  interest  or  management,  or  it  may 
be  through  agreement  and  concert  of  action.  And  the 
purpose  is  so  definitely  the  control  of  prices  that  mon- 
opoly has  been  defined  to  be  'unified  tactics  with  regard 
to  prices.' ' 


Holmes,  J.,  in  the  Northern  Securities  Case,  193  U.  S., 
401,  again  emphasized  the  idea  that  monopoly  was  exclu- 
sion. 


In  Whitwell  vs.  Continental  Tobacco  Co.,  the  Court  ex- 
pressly held  that  the  Tobacco  Company  had  gained  a  monop- 
oly of  part  of  the  tobacco  trade,  but  upheld  it  as  lawful  under 
the  Sherman  Act. 


United  States  vs.  Trans-Missouri  Freight  Association, 
58  Fed.  Eep.,  82,  Sanborn,  J. : 

"A  monopoly  of  trade  embraces  two  essential  ele- 
ments: (1)  The  acquisition  of  an  exclusive  right  to  or 


—166— 

the  exclusive  control  of  that  trade;  and  (2)  the  exclu- 
sion of  all  others  from  that  right  and  control." 

It  is  grasping  the  control  of  a  trade  by  a  few  persons 
who  have  combined  and  conspired  with  each  other  for  the 
purpose  and  with  the  intent  and  with  the  idea  of  gaining  by 
all  means  the  power  to  control  for  the  maleficent  purpose  of 
fixing  the  price  of  the  article  dealt  in.  It  involves  the  use 
of  unlawful  means — trickery  and  fraud  stamped  by  the  law 
as  criminal.  It  is  in  marked  contrast  to  the  legitimate 
growth  of  a  lawful  business. 

The  things  the  monopolist  seeks  for  and  gains  is  the 
ability  to  control  prices  and  suppress  competition ;  while  the 
thing  the  competitor  seeks  for  is  the  extension  of  his  trade  by 
lawful  means.  This  extension  may  give  control  of  trade  and 
enables  one  to  fix  prices,  but  it  is  the  reward  of  competition 
which  the  law  allows.  The  successful  trader  may  not  gain 
such  absolute  control,  and  if  he  does  will  hardly  continue 
to  hold  it  if  the  door  competition  is  left  open. 

The  mere  ability  of  a  merchant  to  fix  the  price  at  which 
he  will  buy  and  sell  any  given  line  of  goods  is  his  indi- 
vidual right,  and  if  he  has  partners,  the  right  of  his  associates 
and  of  the  partnership.  So  long  as  he  restricts  that  right  to 
fixing  his  own  price  at  which  he  will  buy  or  sell  this  line  of 
goods,  he  is  strictly  within  his  lawful  rights  and  no  one  may 
complain.  Indirectly  the  price  that  he  pays  may  affect  the 
market  price,  and  probably  will,  but  in  so  far  as  he  merely 
fixes  his  own  prices  and  does  not  seek  by  devices  and  tricks 
and  any  unlawful  means  to  fix  the  price  for  others,  he  is  not 
committing  an  unlawful  act. 


—167— 


Judge  Taft's  Definition  of  Monopoly. 

Judge  Taft,  not  indeed,  from  the  Bench,  where,  I  agree, 
the  authority  would  be  more  pronounced,  but  with  great 
solemnity  in  his  inaugural  address  on  March  4th,  1909,  said, 
speaking  of  American  business  and  the  stability  and  certainty 
of  the  same,  that  any  plan  determined  upon  by  the  Federal 
Government 

"must  include  the  right  of  the  people  to  avail  themselves 
of  those  methods  of  combining  capital  and  effort  deemed 
necessary  to  reach  the  highest  degree  of  economic  ef- 
ficiency at  the  same  time  differentiating  between  com- 
binations based  upon  legitimate  economic  reasons,  and 
those  formed  with  the  intent  of  creating  monopolies  and 
artificially  controlling  prices." 

Judge  Taft,  on  August  19th,  1907,  at  Columbus,  Ohio, 
referring  to  the  Sherman  Act,  said : 

"The  Supreme  Court  of  the  United  States  has  not 
defined  what  a  monopoly  under  this  section  of  the  anti- 
trust law  is.  I  conceive  that  it  is  not  sufficiently  de- 
fined by  saying  that  it  is  the  combination  of  a  large 
part  of  the  plants  in  the  country  engaged  in  the  manu- 
facture of  a  particular  product  in  one  corporation.  There 
must  be  something  more  than  the  mere  union  of  capital 
and  plant  before  the  law  is  violated.  There  must  be 
some  use  by  the  company  of  the  comparatively  great 
size  of  its  capital  and  plant  and  extent  of  its  output 
either  to  coerce  persons  to  buy  of  it  rather  than  of  some 
competitor,  or  to  coerce  those  who  would  compete  with 
it  to  give  up  their  business.  There  must,  in  other  words, 


—168— 

be  an  element  of  duress  in  the  conduct  of  its  business 
towards  the  customers  of  the  trade  and  its  competitors 
before  mere  aggregation  of  plant,  becomes  an  unlawful 
monopoly." 


In  Whartons  Criminal  Law,  Vol.  2,  page  219,  Sec. 
1369,  he  states  that  to  constitute  a  monopoly  there  must  be 
shown 

"Coercive  or  fraudulent  means  or  the  absorption  of  an 

entire  necessary  staple." 

United  States  vs.  Patterson,  55  Fed.  Bep.,  605,  638, 
Putnam,  Circuit  Judge: 

"  Ordinarily  a  case  cannot  be  made  under  the 
statute  unless  the  means  are  shown  to  be  illegal,  and 
therefore  it  is  ordinarily  necessary  to  declare  the  means 
by  which  it  is  intended  to  engross  or  monopolize  the 
market." 


United  States  vs.  American  Naval  Stores  Co.,  172 
Fed.,  455,  458,  459  (May  12,  1909). 

Sheppard,  J.,  charging  the  jury  in  indictments  for  vio- 
lations of  Sections  One  and  Two : 

"It  is  sometimes  difficult  to  distinguish  between  a 
legitimate  business  enterprise  and  an  illegal  monopoly. 
From  the  law  as  has  been  interpreted,  it  may  be  said, 
however,  that  the  monopoly  is  the  power  acquired  over 


—169— 

the  traffic,  sale  and  purchase  of  a  commodity,  in  the 
course  of  interstate  or  foreign  commerce,  by  which  the 
free  flow  of  such  commerce  and  competition  in  such  com- 
modity is  necessarily  crushed  and  stifled.  Since  the 
size  of  the  business  alone  is  not  necessarily  illegal,  it 
is  the  crushing  of  competition,  by  means  of  force,  threats, 
intimidation,  fraud  or  artful  and  deceitful  means  and 
practices,  which  violates  the  law.  You  will  consider 
carefully  all  the  means  which  the  indictment  charges, 
and  inquire  (1)  whether  the  defendants,  or  any  two  or 
more  of  them,  did  in  fact  unlawfully  combine,  con- 
spire, confederate,  and  agree  together  to  'monopolize/ 
by  acquiring  such  power  over  the  disposition  of  rosins, 
turpentine,  and  naval  stores,  which  were  the  subject  of 
interstate  and  foreign  commerce,  so  that  they  were  cap- 
able of  forming,  and  did  form,  a  scheme  to  crush  and 
stifle  competition;  and  (2)  if  such  scheme  of  gaining 
and  controlling  business  was  to  be  effected  by  illegal 
methods  of  force,  threats,  intimidation,  fraud  or  artful 
or  deceitful  means  and  practices,  which  their  competi- 
tors in  such  trade  were  necessarily  unable  to  meet.  The 
size  of  business,  and  the  gaining  of  business  popularity, 
fair  dealing,  sagacity,  foresight,  and  honest  business 
methods,  even  if  it  should  result  in  acquiring  the  bus- 
iness of  competitors,  would  not  make  an  illegal  monop- 
oly. It  is  the  acquisition  and  use  of  unfair  and  illegal 
power  in  defeating  competition  which  makes  such  ille- 
gal monopoly." 

Fonotipia  Limited  vs.  Bradley,  171  Fed.,  951,  959  (E. 
Disk  K  Y.,  Aug.  7,  1909) : 

Chatfield,  District  Judge: 

nor  is  a  'monopoly,'  in  the  sense  meant  by 
the  statute,   merely  the  complete  occupation  of  a  cer- 


—170— 

tain  field  where  that  occupation  does  not  unfairly  ex- 
clude other  competitors.  The  fact  that  a  certain  person 
is  the  only  dealer  in  certain  goods  may  be  entirely  con- 
sistent with  a  free  and  unlimited  opportunity  to  every 
other  person  to  deal  in  the  same  goods,  and  the  law  of 
proper  demand  and  supply  may  result  in  but  one  source 
from  which  certain  things  can  be  secured,  without  there- 
by rendering  the  person  supplying  these  goods  liable 
to  the  accusation  of  illegally  maintaining  a  monopoly. 
A  certain  intent  and  certain  motives,  which  need  not  be 
discussed  at  length,  must  be  present  to  establish  the 
interference  with  competition  and  the  existence  of  the 
monopoly  at  which  the  statute  above  mentioned  was 
aimed  and  which  is  included  within  its  provisions.  A 
mere  attempt  to  obtain  a  fair  profit,  even  by  an  agree- 
ment not  to  undersell,  must  be  tested  by  the  measure  of 
what  would  be  a  fair  price  under  competition,  and  it 
must  be  determined  whether  the  centralization  or  con- 
trol of  the  output  is  intended  to  or  does  accomplish  any 
interference  with  the  free  action  of  independent  parties 
who  might  compete,  or  with  the  securing  to  the  public 
of  all  the  benefits  to  which  they  are  entitled,  over  and 
above  the  reasonable  cost  of  production  and  reasonable 
profit." 

United  States  vs.  American  Tobacco  Co.,  164  Fed.,  700, 
722,  727.    Judge  Ward,  in  his  dissent,  said: 

"It  remains  to  inquire  whether  the  American  To- 
bacco Company  and  its  controlled  companies  constitute 
a  monopoly  of  or  attempt  to  monopolize  a  part  of  the 
foreign  commerce  or  commerce  between  the  states  under 
the  second  section  of  the  Sherman  Act.  As  this  section 
prohibits  a  monopoly  of  or  an  attempt  to  monopolize  any 
part  of  such  commerce  it  cannot  be  literally  construed. 
So  applied,  the  act  would  prohibit  commerce  altogether. 


—171— 

The  first  and  second  sections  must  be  read  together,  and 
I  think  mean  the  same  thing ;  the  second  adding  nothing 
except  to  extend  the  prohibition  to  individuals  who, 
without  combination,  monopolize  or  attempt  to  monopo- 
lize. It  must  be  understood  to  prohibit  monopolies  or 
attempts  to  monopolize  'brought  about  by  the  unlawful 
means  contemplated  in  the  first  section,  viz.,  the  pur- 
pose to  restrain  trade  by  preventing  competition  and 
preventing  others  from  participating  in  it.  The  third 
section  of  the  act  bears  out  this  construction,  because 
it  does  not  mention  monopolies,  or  attempts  to  monopo- 
lize in  the  territories  or  District  of  Columbia,  where  the 
jurisdiction  of  the  United  States  is  supreme  in  all 
things,  and  it  can  hardly  be  that  Congress  intended  to 
declare  innocent  acts  committed  within  them  which  it 
pronounces  crimes  if  committed  in  the  states." 


West  Virginia  Transportation  Company  vs.  Standard 
Oil  Company,  50  W.  Va.,  611  (1900) : 

"This  monopoly  *     *     is  the  act  of  persons 

and  corporations,  by  union  of  means  and  effort,  drawing 
to  themselves,  in  the  field  of  competition,  the  lion's 
share  of  trade.  This  is  not  monopoly  condemned  by 
law." 


—172— 


JUDGE  SANBORN'S  OPINION  IN  THE  CONTI- 
NENTAL TOBACCO  CASE. 

In  Whitwell  vs.  Continental  Tobacco  Company,  125 
Fed.  Rep.,  454,  the  Circuit  Court  of  Appeals  of  the  Eighth 
Circuit,  Sanborn,  Thayer  and  Vandevanter  sitting,  Judge 
Sanborn  delivered  the  opinion. 

The  facts  were  that  the  Continental  Tobacco  Company 
was  a  manufacturer  of  tobacco  which  owned  and  controlled 
most  of  the  valuable  and  leading  brands  of  plug  and  chewing 
tobacco  in  the  United  States  (p.  456), 

"and  fixes  the  market  prices  thereof." 

The  Court  said  (457)  : 

aThe  test  of  the  legality  of  a  combination  under 
the  act  which  was  inspired  by  this  purpose  is  its  direct 
and  necessary  effect  upon  competition  in  commerce 
among  the  states.  If  its  necessary  effect  is  to  stifle  or 
to  directly  and  substantially  restrict  free  competition, 
it  is  a  contract,  combination  or  conspiracy  in  restraint 
of  trade,  and  it  falls  under  the  ban  of  the  law. 

(457-458)  "If,  on  the  other  hand,  it  promotes  or 
but  incidentally  or  indirectly  restricts  competition,  while 
its  main  purpose  and  chief  effect  are  to  foster  the  trade 
and  increase  the  business  of  those  who  make  and  operate 
it  then  it  is  not  a  contract,  combination  or  conspiracy  in 
restraint  of  trade  within  the  true  interpretation  of  this 
act,  and  it  is  not  subject  to  its  denunciation. 

(462)  "It  is  admitted  that  the  practice  of  the  de- 
fendants was  not  only  an  attempt,  but  a  successful  at- 
tempt to  monopolize  a  part  of  this  commerce.  But  is 
every  attempt  to  monopolize  any  part  of  interstate  com- 
merce made  unlawful  and  punishable  by  Sec.  2  of  *  *  * 


—173— 

(the  Sherman  Act)  ?  If  so,  no  interstate  commerce  has 
ever  been  lawfully  conducted  since  that  act  became  a 
law,  because  every  sale  and  every  transportation  of  an 
article  which  is  the  subject  of  interstate  Commerce  is  a 
successful  attempt  to  monopolize  that  part  of  this  com- 
merce which  concerns  that  sale  or  transportation.  An 
attempt  by  each  competitor  to  monopolize  a  part  of  inter- 
state commerce  is  the  very  root  of  all  competition  there- 
in. Eradicate  it,  and  competition  necessarily  ceases — 
dies.  Every  person  engaged  in  interstate  commerce 
necessarily  attempts  to  draw  to  himself  and  to  exclude 
others  from  a  part  of  that  trade,  and  if  he  may  not 
do  this  he  may  not  compete  with  his  rivals.  All  other 
persons  and  corporations  must  cease  to  secure  for  them- 
selves any  part  of  the  commerce  among  the  states,  and 
some  single  corporation  or  person  must  be  permitted  to 
receive  and  control  it  all  in  one  huge  monopoly. 

"The  purpose  of  the  Act  of  July  2nd,  1890,  was, 
however,  to  prevent  the  stifling  of  competition,  not  to 
destroy  it,  or  foster  monopoly,  and  any  construction 
of  any  of  its  provisions  which  would  give  it  such  an 
effect  is  unreasonable  and  inconsistent  with  the  object 
and  spirit  of  the  law.  It  is  an  interpretation  which 
fosters  the  mischief  it  was  passed  to  remedy  and  de- 
stroys the  remedy  provided  to  abate  the  evil,  while  a 
sound  construction  would  tend  to  abate  the  mischief 
and  to  promote  the  remedy.  It  cannot,  therefore,  be 
the  true  meaning  of  the  second  section  of  this  law  that 
every  attempt  to  monopolize  any  part  of  interstate  com- 
merce is  illegal.  The  act  must,  as  the  Supreme  Court 
has  twice  declared  have  a  reasonable  con- 

struction. The  purpose  of  the  second  section  is  the  same 
as  that  of  the  first — to  prevent  the  restriction  of  com- 
petition— and  the  two  sections  ought  to  receive  similar 
interpretations.  The  Supreme  Court  has  declared  that 


—174— 

the  true  construction  of  the  first  section  is  that  no  con- 
tract, combination  or  conspiracy  is  denounced  by  it 
unless  its  necessary  effect  is  to  directly  and  substantially 
restrict  competition  in  commerce  among  the  states.  By 
a  parity  of  reasoning,  the  correct  interpretation  of  the 
second  section  must  be  that  no  attempt  to  monopolize  a 
part  of  commerce  among  the  states  is  made  illegal  or 
punishable  by  the  provisions  of  that  section  unless  the 
necessary  effect  of  that  attempt  is  to  directly  and  sub- 
stantially restrict  commerce  among  the  states 
It  was  not — it  could  not  have  been — the  purpose  or  the 
effect  of  the  second  section  of  this  law  to  prohibit  or  to 
punish  the  customary  and  universal  attempts  of  all 
manufacturers,  merchants  and  traders  engaged  in  inter- 
state commerce  to  monopolize  a  fair  share  of  it  in  the 
necessary  conduct  and  desired  enlargement  of  their 
trade,  while  their  attempts  leave  their  competitors  free 
to  make  successful  endeavors  of  the  same  kind.  * 

(463)  An  attempt  to  monopolize  a  part  of  the  in- 
terstate commerce,  the  necessary  effect  of  which  is  to  stifle 
or  to  directly  and  substantially  restrict  competition  in 
commerce  among  the  states,  violates  the  second  section  of 
this  act.  But  an  attempt  to  monopolize  a  part  of  inter- 
state commerce  which  promotes  or  but  indirectly  or  in- 
cidentally restricts  competition  therein,  while  its  main 
purpose  and  chief  effect  are  to  increase  the  trade  and 
foster  the  business  of  those  who  make  it,  was  not  in- 
tended to  be  made  and  was  not  made  illegal  by  the  sec- 
ond section  of  the  act  under  consideration,  because  such 
attempts  are  indispensable  to  the  existence  of  any  com- 
petition in  commerce  among  the  states." 

In  Phillips  vs.  Tola  Portland  Cement  Co.,  125  Fed.,  593, 
594,  it  is  said  by  the  same  judge: 

"It  is  now  settled  by  repeated  decisions  of  the  Su- 
preme Court  that  the  test  of  the  validity  of  a  contract, 


—175— 

combination  or  conspiracy  challenged  under  the  anti- 
trust law  is  the  direct  effect  of  such  a  contract  or  com- 
bination upon  competition  in  commerce  among  the 
states.  If  its  necessary  effect  is  to  stifle  competition, 
or  to  directly  and  substantially  restrict  it,  it  is  void. 
But  if  it  promotes,  or  only  incidentally  or  indirectly 
restricts,  competition  in  commerce  among  the  states, 
while  its  main  purpose  and  chief  effects  are  to  foster  the 
trade  and  enhance  the  business  of  those  who  make  it, 
it  does  not  constitute  a  restraint  of  interstate  commerce 
within  the  meaning  of  that  law,  and  is  not  obnoxious 
to  its  provisions.  This  act  of  Congress  must  have  a  rea- 
sonable construction.  It  was  not  its  purpose  to  prohibit 
or  to  render  illegal  the  ordinary  contracts  or  combina- 
tions of  manufacturers,  merchants  and  traders,  or  the 
usual  devices  to  which  they  resort  to  promote  the  suc- 
cess of  their  business,  to  enhance  their  trade,  and  to 
make  their  occupation  gainful,  so  long  as  those  combi- 
nations and  devices  do  not  necessarily  have  a  direct  and 
substantial  effect  to  restrict  competition  in  commerce 
among  the  states. " 

The  Supreme  Court  refused  a  certiorari  in  this  case. 
See  192  U.  S.,  606. 


—176- 


MONOPOLY,   REGRATING,   FORESTALLING. 

The  history  of  it  is  shown  in  the  old  English  textbooks : 
First  Eussell  on  Crimes: 

"Monopolies  are  much  the  same  offense  in  other 
branches  of  trade  that  engrossing  is  in  provisions. 
*  *  *  They  are  said  to  differ  only  in  this,  that 
monopoly  is  by  patent  from  the  King,  engrossing  by  the 
act  of  the  subject  between  party  and  party;  and  have 
been  considered  as  both  equally  injurious  to  trades  and 
the  freedom  of  the  subject,  and  therefore  equally  re- 
strained by  the  common  law. 

"By  the  common  law,  therefore,  those  who  are 
guilty  of  this  offense  are  subject  to  confinement  and  im- 
prisonment, the  offense  being  malum  in  se  and  con- 
trary to  the  ancient  fundamental  laws  of  the  kingdom." 


In  Blackstone's  Commentaries,  Book  4,  *  page  159,  it 
is  said : 

"Monopolies  are  much  the  same  offense  in  other 
branches  of  trade  that  engrossing  is  in  provisions ;  being 
a  license  or  privilege  allowed  by  the  King  for  the  sole 
buying  and  selling,  making,  working  or  using  of  any- 
thing whatsoever  whereby  the  subject  in  general  is  re- 
strained from  that  liberty  of  manufacturing  or  trading 
which  he  had  before." 


In  First  Hawkins  Pleas  of  the  Crown,  8th  Ed.,  p.  624: 
"A  monopoly  is  an  allowance  by  the  King  to  a  par- 
ticular person  or  persons  of  the  sole  buying,   selling, 
making,  working  or  using  of  anything  whereby  the  sub- 


— -in- 
ject in  general  is  restrained  from  the  freedom  of  manu- 
facturing or  trading  which  he  had  before.  Monopoly 
differs  from  engrossing  only  in  this:  That  monopoly 
is  hy  patent  from  the  King,  and  engrossing  by  an  act  of 
the  subject  between  party  and  party." 


Bacon  s  Abridgement,  Title  of  Monopoly: 

"A  monopoly  is  described  by  My  Lord  Coke  to  be 
an  institution  or  allowance  by  the  King  by  his  grant, 
commission  or  otherwise  to  any  person  or  persons, 
bodies,  politic  or  corporate,  of  or  for  the  sole  buying, 
selling,  making,  working  or  using  of  anything  whereby 
any  person  or  persons,  bodies,  politic  or  corporate,  are 
sought  to  be  restrained  of  any  freedom  or  liberty  that 
they  had  before,  or  hindered  in  their  lawful  trade. 

"Monopoly  and  engrossing  differ  only  in  this :  That 
the  first  is  by  patent  from  the  King  and  the  other  by 
act  of  the  subject  between  party  and  party;  but  are  both 
equally  injurious  to  the  trade  and  the  freedom  of  the 
subject;  therefore  are  equally  restrained  by  the  com- 
mon law." 


See  Justice  Fields'  Opinion,  Slaughter  House  Cases 
16th  Wallace,  101. 


In  the  Butchers  Union  Case,  111  U.  S.,  755,  Mr.  Jus- 
tice Field  said : 

"A  monopoly  is  defined  'to  be  an  institution  or  al- 
lowance from  the  sovereign  body  of  the  state  by  grant, 
commission  or  otherwise  to  any  person  or  corporation 
for  the  sole  buying,  selling,  making,  working  or  using 
of  anything  whereby  any  person  or  persons,  bodies  po- 


—178— 

litic  or  corporate,  are  sought  to  be  restrained  of  any 
freedom  or  liberty  they  had  before,  or  hindered  in  their 
lawful  trade.7  All  grants  of  this  kind  are  void  at  com- 
mon law  because  they  destroy  the  freedom  of  trade,  dis- 
courage labor  and  industry,  restrain  persons  from  get- 
ting an  honest  livelihood,  and  put  it  in  the  power  of  the 
grantees  to  enhance  the  price  of  commodities.  They  are 
void  because  they  interfere  with  the  liberty  of  the  in- 
dividual to  pursue  a  lawful  trade  or  employment." 


The  Supreme  Court  of  the  United  States  in  the  Charles 
River  Bridge  Case,  11  Peters,  607,  states  that  the  monopoly 
as  understood  in  law  is 

"An   exclusive  right   granted   to   a  few,   of  something 

which  was  before  of  common  right." 

Fields,  J.,  gave  the  same  definition  in  the  Slaughter 
House  Case,  16  Wallace,  102. 


McKenna,  J.,  in  National  Cotton  Oil  Co.,  197  U.  S., 
129,  said  that  a  monopoly  is  now 

"understood  to  include  'SL  condition  produced  by  the 
acts  of  mere  individuals/  Its  dominant  thought  now 
is,  to  quote  another,  'the  notion  of  exclusiveness  or 
unity  *  *  *" 


Holmes,  J.,  in  Northern  Securities  Case,  193  U.   S., 
409,  again  emphasized  the  idea  that  monopoly  was  exclusion. 

In  the  time  of  Lord  Coke  and  prior  thereto  engrossing, 
regrating  and  forestalling  were  each  crimes  at  common  law, 


—179— 

arid  related  to  the  mere  necessaries  of  life.  The  reason  they 
were  held  to  be  crimes  was  that  the  public  were  prevented 
from  acquiring  the  necessaries  of  life  at  the  prices  fixed  by 
the  law  of  competition.  The  law  embraced  only  the  things 
which  one  went  to  the  market  to  buy,  and,  as  Blackstone  says 
(4th  Book,  *158)  as  to  forestalling  — 

"  which  practices  make  the  market  dearer  to  the  fair 

trader." 

As  to  Kegrating  (4th  Book,  *158)  : 

"For  this  also  enhances  the  price  of  the  provisions. 


As  to  Engrossing  (4th  Book,  *159)  : 

"This  must,  of  course,  be  injurious  to  the  public  by 
putting  it  in  the  power  of  one  or  two  rich  men  to  raise 
the  price  of  provisions  at  their  own  discretion." 

It  was  then  to  protect  the  public  from  artificial  and  high 
prices  for  the  things  they  ate,  and  this  was  the  reason  for 
and  the  foundation  of  that  law. 

But  as  to  the  trades  and  occupations  in  life,  the  Courts 
held  each  Englishman  (like  each  American)  had,  of  right,  ac- 
cess thereto,  and,  therefore,  when  the  Crown  granted  a  mo- 
nopoly of  the  exclusive  right  to  make  and  sell  playing  cards, 
the  Court  held  the  Letters  Patent  were  void  ;  not  because  the 
price  of  playing  cards  was  increased,  but  because  all  other 
Englishmen  were  excluded  from  making  and  selling  the  same. 
It  was  solely  on  the  exclusive  feature  that  such  grants  were 
held  void. 

Strictly  speaking,  forestalling,  engrossing  and  regrat- 
ing  were  a  species  of  crime  at  common  law,  relating  solely 


—180— 

to  the  purchase  and  sale  of  provisions  or  the  necessaries  of 
life. 

A  monopoly  was  only  the  grant  by  the  King  of  an  ex- 
clusive right  to  carry  on  a  certain  trade  which  theretofore 
was  common  to  all,  thereby  excluding  all  others  from  such 
trade. 

They  are  two  distinct  independent  offenses  arising  out 
of  distinct  circumstances  and  founded  on  distinct  and  inde- 
pendent reasons. 

Remembering  this,  and  also  remembering  that  the  Fed- 
eral Courts  look  to  the  common  law  for  a  definition  of  words 
having  there  a  known  significance,  we  may  at  least  assert 
that: 

Any  definition  such  Courts  give  of  monopoly  will 
at  least  embrace  the  following  elements : 

(1)  The  idea  of  exclusiveness — that  one  set  of 
men  exclude  or  keep  out  of  a  certain  trade  or  business 
all  other,    or    at    least,    some    other    men    desiring    to 
enter  it; 

(2)  That  such  exclusion  is  unlawful  or  is  effected 
by  unlawful  means ; 

(3)  As  the  Sherman  Act  is  passed  avowedly  to 
further  competition,  and  as  the  very  life  of  competition 
demands  that  the  competitor  who  wins  is  lawfully  en- 
titled to  the  prize,  that  if  the  exclusion  of  others  is  only 
because  of  successful  competition,  it  is  not  unlawful. 

Pettibone  vs.  United  States,  148  U.  S.,  197,  203,  Chief 
Justice  Fuller: 

"The  courts  of  the  United  States  *  *  *  re- 
sort to  the  common  taw  for  the  definition  of  terms  by 
which .  off enses  are  designated." 


—181— 

Exparte  Wells,  18  How.,  307,  321: 

"When  a  term  is  used  in  our  Constitution  or 
statutes  which  is  known  at  the  common  law  we  look  to 
that  system  for  its  meaning." 


Crime. 

Monopoly  carries  with  it  the  idea  of  crime.  To  be  a 
monopolist  is  to  be  a  criminal.  It  denotes  wrongdoing.  The 
successful  merchant  who  gains  as  the  reward  of  competition 
60  or  80  or  90  per  cent,  of,  say,  the  oil  trade  of  1906,  is 
not  a  monopolist  or  a  wrong-doer  by  reason  thereof,  any  more 
than  the  fur  merchant  who  gains  the  January  trade  in  seal- 
skins. 


Monopoly  Under  the  Sherman  Act. 

The  word  "monopoly"  has  at  least  two  meanings :  the 
one  is  that  which  includes  lawful  monopolies,  such  as  pat- 
ents— a  trade  governed  by  a  secret  process  for  making  the 
article  of  commerce :  or  a  temporary  control  of  the  market  in 
any  one  line  gained  by  lawful  means  under  competition.  The 
other  and  invidious  sense  is  the  control  or  engrossing  of  the 
market  by  unlawful  means.  In  either  case,  except  perhaps 
a  patent,  the  basis  of  monopoly  is  contractual. 


Every  trader,  like  every  professional  man,  monopolizes 
a  certain  portion  of  the  trade  or  profession;  that  is,  he  has 
the  exclusive  use  and  control  of  that  certain  portion,  and  he 
allows  no  one  to  interfere  with  that  exclusive  use  and  con- 


—182— 

trol  if  he  can  help  it,  and  this  is  a  necessary  law  of  trade, 
without  which  trade  could  not  be  carried  on. 

But  the  Sherman  Act  does  make  an  attempt  to  monopo- 
lize 

"any   part   of  trade   or   commerce   among  the   several 
states" 

a  misdemeanor.  Literally  carried  out  and  giving  a  broad 
meaning  to  the  word  "monopoly,"  as  it  was  argued  in  the 
Trans-Missouri  and  the  Freight  Association  cases,  would  in- 
clude every  act  of  a  trader  in  the  acquisition  of  any  part  of 
the  trade  or  commerce  among  the  several  state.  Its  literal 
construction,  therefore,  is  impossible. 

The  title  of  the  act  is  to  protect  trade  and  commerce  and 
to  protect  them  against 

"unlawful  restraints  and  monopolies." 

A  construction  of  Section  *Z  which  literally  enforced 
each  of  its  words  would  not  protect,  but  destroy  interstate 
trade,  and  would  prevent  ordinary  corporations  and  partner- 
ships and  individuals  from  engaging  in  the  same,  because 
each  man  who  enters  that  trade  does  seek  to  exclusively  seize 
some  portion  of  it. 


In  the  Joint  Traffic  Association  cases,  171  U.  S.,  566, 
the  Court  said  that  the  argument  had  been  pressed  that  the 
Sherman  Act  literally  construed 

"limits  the  freedom  and  destroys  the  property  of  the 
individual  *  *  *  and  that  ordinary  contracts  and 
combinations  which  are  at  the  same  time  most  indis- 


—183— 

pensable,  have  the  effect  of  somewhat  restraining  trade 
and  commerce,  although  to  a  very  slight  extent,  but  yet 
under  the  construction  adopted  they  are  illegal." 

The  court,  on  page  567,  calls  attention  to  the  numerous 
instances  of  the  organization  of  mechanics  and  their  business, 
the  formation  of  a  corporation  by  several,  a  contract  of  part- 
nership, the  purchase  by  one  wholesale  merchant  of  the 
product  of  two  producers,  etc. 

All  these  were  cited  by  counsel  as  in  support  of  the 
proposition  that  all  restraints  of  trade  were  declared  illegal 
under  section  one  of  the  Sherman  Act,  and  that  such  scope 
would  include  the  simplest  kind  of  trade.  The  court  an* 
swered  (567)  : 

"*  *  *  the  formation  of  corporations  for  busi- 
ness or  manufacturing  purposes  has  never  to  our  knowl- 
edge been  regarded  in  the  nature  of  a  contract  in 
restraint  of  trade  or  commerce.  The  same  may  be  said 
of  the  contract  of  partnership.  It  might  also  be  dif- 
ficult to  show  that  the  appointment  by  two  or  more  pro- 
ducers of  the  same  person  to  sell  their  goods  on  commis- 
sion was  a  matter  in  any  degree  in  restraint  of  trade. 
We  are  not  aware  that  it  has  ever  been  claimed  that  a 
lease  or  purchase  by  a  farmer,  manufacturer  or  mer- 
chant of  an  additional  farm,  manufactory  or  shop,  or 
the  withdrawal  from  business  of  any  farmer,  merchant 
or  manufacturer  restrained  commerce  or  trade  within 
any  legal  definition  of  that  term.  And  the  sale  of  a 
good  will  of  a  business  with  an  accompanying  agree- 
ment not  to  engage  in  a  similar  business  was  instanced 
in  the  Trans-Missouri  case  as  a  contract  not  within  the 
meaning  of  the  act.  *  *  *  In  Hopkins  vs.  United 
States,  decided  at  this  term  (Post,  578),  we  say  that 
the  statute  applies  only  to  those  contracts  whose  direct 


—184— 

and  immediate  effect  is  a  restraint  upon  interstate  com- 
merce, and  that  to  treat  the  act  as  condemning  all  agree- 
ments under  which,  as  a  result  the  cost  of  conducting 
an  interstate  commercial  business  may  be  increased, 
would  enlarge  the  application  of  the  act  far  beyond  the 
fair  meaning  of  the  language  used.  The  effect  upon 
interstate  commerce  must  not  be  indirect  or  incidental 
only.  An  agreement  entered  into  for  the  purpose  of 
promoting  the  legitimate  business  of  an  individual  or 
corporation,  with  no  purpose  to  thereby  affect  or  re- 
strain interstate  commerce,  and  which  does  not  directly 
restrain  such  commerce,  is  not,  as  we  think,  covered  by 
the  act,  although  the  agreement  may  indirectly  and  re- 
motely affect  that  commerce.  We  also  repeat  what  is 
said  in  the  case  above  cited,  that  'the  act  of  Congress 
must  have  a  reasonable  construction  or  else  there  would 
scarcely  be  an  agreement  or  contract  among  business 
men  that  could  not  be  said  to  have  indirectly  or  re- 
motely some  bearing  upon  interstate  commerce  and  pos- 
sibly to  restrain  it.7  To  suppose,  as  is  assumed  by  coun- 
sel, that  the  effect  of  the  decision  in  the  Trans-Missouri 
case  is  to  render  illegal  most  business  contracts  or  com- 
binations, however  indispensable  and  necessary  they 
may  be,  because,  as  they  assert,  they  all  restrain  trade 
in  some  remote  and  indirect  degree,  is  to  make  a  most 
violent  assumption,  and  one  not  called  for  or  justified 
by  the  decision  mentioned  or  by  any  other  decision  of 
this  court." 


—185— 


TEST  OF  MONOPOLY. 


It  is  respectfully  submitted  that  the  test  as  to 
whether  a  combination  has  created  a  monopoly  in  inter- 
state trade  and  restrained  interstate  trade  is  this :  Has 
the  combination  gained  by  using  unlawful  means — not 
whether  here  or  there  in  a  vast  business,  improper 
things  have  been  done, — but  were  the  improper  things 
the  prevailing,  controlling,  and  practically  exclusive 
means  by  which  a  monopoly  was  gained. 


If  this  is  not  proven,  (as  it  is  not,)  then  the  inquiry 
ends. 


Assume  arguendo  that  it  is  proven,  then  the  next  in- 
quiry is,  Were  the  defendants  doing  unlawful  things 
when  the  petition  was  filed?  If  so,  but  only  if  so,  as  to 
those  unlawful  things  then  being  done,  an  injunction 
will  issue. 


RESTRAINT  OF  TRADE. 

The  contracts  or  combinations  in  restraint  of  inter- 
state and  foreign  trade  or  commerce  denounced  in  the 
first  section  of  the  Sherman  Act  are  contracts  or  combi- 
nations between  independent  persons  or  corporations, 
actually  competing  with  one  another,  whereby  such 
competition  is  avoided,  prices  controlled,  profits  unduly 
enhanced,  etc. 


—186— 


(X)  What  one  man  may  lawfully  do,  two  or 
more  may  join  him  in  so  doing,  and  the  result  is  just  as 
lawful  as  if  done  by  one.  If  the  thing  done  is  unlawful 
even  though  done  by  one,  it  may  not  be  of  itself  a  crime 
— but  if  two  or  more  unite  in  doing  the  same  unlawful 
thing,  this  may  constitute  a  crime. 

But  a  lawful  thing  that  one  may  do  is  not  made  un- 
lawful or  criminal  merely  because  several  join  In  so  doing. 


In  MacAuley  vs.  Tierney,  19  R.  L,  225,  the  Supreme 
Court  of  Rhode  Island  said  that 

"what  a  person  may  lawfully  do,  a  number  of  persons 
may  unite  with  him  in  doing  without  rendering  them- 
selves liable  to  the  charge  of  conspiracy,  provided  the 
means  employed  be  not  unlawful." 

In  the  Bolin  Mfg.  Co.  vs.  Northwest  Lumbermen's  Asso- 
ciation, 54  Minn.,  223,  the  Court  said : 

"If  any  act  be  lawful,  one  that  the  party  has 
a  legal  right  to  do,  the  fact  that  he  may  be  actuated 
by  an  improper  motive  does  not  render  it  unlawful.  As 
said  in  one  case,  "the  exercise  by  one  man  of  a  legal 
right  cannot  be  a  legal  wrong  to  another,7  or,  as  expressed 
in  another  case,  'malicious  motives  make  a  bad  case 
worse,  but  they  cannot  make  that  wrong  which,  in  its  own 
essence,  is  lawful.'  Heywood  vs.  Tillson,  75  Me.,  225,  46 
Am.  Rep.,  373 ;  Phelps  vs.  Noivlen,  72  K  Y.,  39,  28 
Am.  Rep.,  93 ;  Jenkins  vs.  Fowler,  24  Pa.,  308." 

"What  one  man  may  lawfully  do  singly,  two 
or  more  may  lawfully  agree  to  do  jointly.  The  number 


—187— 

who  unite  to  do  the  act  cannot  change  its  character  from 
lawful  to  unlawful.  The  gist  of  a  private  action  for 
the  wrongful  act  of  many  is  not  the  combination  or  con- 
spiracy, but  the  damage  done  or  threatened  to  the  plain- 
tiff by  the  acts  of  the  defendants.  If  the  act  be  unlaw- 
ful the  combination  of  many  to  commit  it  may  aggravate 
the  injury,  but  cannot  change  the  character  of  the  act. 
In  a  few  cases  there  may  be  some  loose  remarks  ap- 
parently to  the  contrary,  but  they  evidently  have  their 
origin  in  a  confused  and  inaccurate  idea  of  the  law  of 
criminal  conspiracy,  and  in  failing  to  distinguish  be- 
tween an  unlawful  act  and  a  criminal  one.  It  can  never 
be  a  crime  to  combine  to  commit  a  lawful  act,  but  it  may 
be  a  crime  for  several  to  conspire  to  commit  an  unlaw- 
ful act,  which  if  done  by  one  individual  alone,  although 
unlawful,  would  not  be  criminal.  Hence,  the  fact  that 
the  defendants  associated  themselves  together  to  do  the 
act  complained  of  is  wholly  immaterial  in  this  case." 

This  principle  is  reaffirmed  in  State  vs.  Duluth  Board 
of  Trade,  Minn.,  121  N.  W.,  395,  411  (May,  1909). 

Notional  Protective  Association  vs.  Cumming,  170  isT. 
Y.,  315,  58  L.  R.  A.,  135,  138: 

"Whatever  one  man  may  do  alone,  he  may  do  in 
combination  with  others,  provided  they  have  no  unlaw- 
ful object  in  view.  Mere  numbers  do  not  ordinarily 
affect  the  quality  of  the  act." 

Martens  vs.  Reilly,  109  Wis.,  464,  472: 

"An  act  legal  in  itself,  in  that  it  does  not  offend 
against  the  criminal  law  and  the  injuries  are  damnum 
abtquc  injuria,  regardless  of  its  violation  of  moral  stand- 
ards, whether  such  act  be  the  one  perpetrated  or  the 
means  used  to  that  end,  generally,  if  not  the  subject  of 


a  civil  action  for  damages  when  done  ~by  one  person,  is 
not  if  done  by  many  acting  in  concert" 

Collins  vs.  American  News  Co.,  34  !S\  Y.  Misc., 

260,  263. 

The  Court  said  as  to  a  combination  of  publishers  to  cut 
off  the  supply  of  a  customer : 

"What  any  publisher  could  lawfully  do  individu- 
ally all  the  publishers  may  lawfully  combine  to  do." 

Vegelahn  vs.  Guntner,  167  Mass.,  92,  35  L.  R  A.,  722, 
727.     Holmes,  J. : 

"But  there  is  a  notion,  which  latterly  has  been  in- 
sisted on  a  good  deal,  that  a  combination  of  persons  to 
do  what  any  one  of  them  lawfully  might  do  by  himself 
will  make  the  otherwise  lawful  conduct  unlawful.  It- 
would  be  rash  to  say  that  some  as  yet  unformulated 
truth  may  not  be  hidden  under  this  proposition.  But, 
in  the  general  form  in  which  it  has  been  presented  and 
accepted  by  many  courts,  I  think  it  plainly  untrue,  both 
on  authority  and  on  principle.  Com.  vs.  Hunt,  4  Met., 
Ill,  38  Am.  Dec.,  346;  Randall  vs.  Hazelton,  12  Allen, 
412,  414.  There  was  combination  of  the  most  flagrant 
and  dominant  kind  in  Bowen  vs.  Matheson,  and  in  the 
Mogul  S.  S.  Co.  Case,  and  combination  was  essential 
to  the  success  achieved.  But  it  is  not  necessary  to  cite 
cases.  It  is  plain  from  the  slightest  consideration  of 
practical  affairs,  or  the  most  superficial  reading  of  in- 
dustrial history,  that  free  competition  means  combina- 
tion, and  that  the  organization  of  the  world,  now  going 
on  so  fast,  means  an  ever  increasing  might  and  scope  of 
combination.  It  seems  to  me  futile  to  set  our  faces 
against  this  tendency.  Whether  beneficial  on  the  whole, 
as  I  think  it,  or  detrimental,  it  is  inevitable,  unless  the 


—189— 

fundamental  axioms  of  society,  and  even  the  fundamen- 
tal conditions  of  life,  are  to  be  changed." 


COMPETITION. 

The  means  for  tho  acquisition  of  trade  which  the  law 
gives  to  every  citizen  of  the  United  States  and  every  one  en- 
gaged in  interstate  commerce,  is  competition.  Competition, 
the  law  says,  increases  trade,  and  everyone  who  is  a  citizen  of 
the  United  States  may  use  competition  to  acquire  a  portion  of 
the  interstate  trade.  The  word  itself  carries  its  meaning — no 
definition  of  it  makes  it  clearer  or  adds  to  the  ideas  which  the 
word  itself  suggests.  It  denotes  strife — struggles  with  others. 
It  means  warfare  for  the  same  thing,  and  the  end  sought  is 
that  for  which  all  strive. 

Webster  defines  competition: 

"The  act  of  seeking  or  endeavoring  to  gain  what 
another  is  endeavoring  to  gain  at  the  same  time; — 
uCommon  strife  for  the  same  object." 

The  strife  is  always  to  own  exclusively  the  thing  sought 
after  and  to  own  it,  possess  it  to  the  exclusion  of  all  other  per- 
sons. If  it  be  a  prize,  i.  e.,  a  silver  cup,  I  take  it  homo  as  its 
sole  exclusive  owner,  and  no  one  may  touch  it  unless  I  permit. 
If  it  be  the  intangible  thing  called  business  or  trade  among 
a  dozen  competitors,  more  than  one  may  win  a  portion  of  it, 
but  yet  each  strives  for  the  whole,  and  the  law  does  not  limit 
the  extent  of  the  reward  for  each.  The  business  or  trade  thus 
fought  for  is  not  a  stationary,  tangible  thing  like  a  silver  cup ; 
it  is  always  in  motion ;  it  is  the  spring  trade  or  the  fall  trade 
or  the  summer  or  winter  trade,  as  it  may  be.  Now  there  are 


—190— 

100  customers  whose  trade  is  sought  for,  and  now  500.  The 
customers  themselves  change.  The  locations  of  the  customers 
vary,  now  here,  and  now  there.  Even  in  any  one  branch  of 
trade,  as,  say  the  oil  trade,  now  one  sort  of  the  product  is 
demanded  and  now  another.  To  compete  for  this  trade  is  not 
regrating  or  forestalling  or  engrossing  the  village  market  for 
the  necessaries  of  life. 

These  and  many  other  characteristics  of  interstate  trade 
in  oil  and  business  prove  that  its  control  of  to-day  does  not 
insure  such  control  next  week,  and  he  who  wins,  and  therefore 
exclusively  controls  the  spring  trade,  has  not  won  the  fall 
trade,  and  the  danger  of  a  monopoly  is  rendered  less  immi- 
nent and  not  dangerous  so  long  as  the  doors  of  competition 
are  not  locked.  Leave  them  open,  and  the  law  of  trade  cor- 
rects seeming  errors. 

Competition  knows  no  limit  except  that  the  means  used 
must  he  lawful.  Academic  treatises  which  talk  of  unfair  com- 
petition and  undue  competition  and  unreasonable  competition 
find  no  authority  in  the  settled  decisions  of  England  or  of  this 
country.  Each  individual's  fundamental  right  is  to  compete 
for  all  the  interstate  trade  if  he  so  elects.  His  liberty  so  to  do 
is  not  restricted  by  saying  that  he  must  use  in  the  compe- 
tition fair  or  reasonable  skill  or  ingenuity  or  means  of  war- 
fare. How  could  the  law  measure  and  define  what  was  fair, 
what  reasonable  and  what  undue  ?  God  gives  to  one  man  un- 
usual skill  and  aptitude  in  some  branch  of  trade — or  in  many 
branches — say,  like  Edison.  To  limit  him  is  to  deny  to  the 
world  at  large  the  manifold  advantages  of  his  skill  and  in- 
genuity. Such  skill  will  in  a  large  degree  give  to  him  tem- 
porarily the  control  of  whatever  branch  of  trade  he  enters, 
but  if  honestly  acquired,  the  law  awards  it.  He  may  use  any 
means  which  does  not  infringe  upon  the  legal  rights  of  his 
fellow  citizens.  If  he  uses  any  means  which  interferes  with 
such  right,  this  is  unlawful,  and  he  may  not  use  it.  But  aside 


—191— 

from  this  limitation,  the  choice  of  weapons  and  of  means,  is 
his  own ;  the  war  is  on,  and  each  competitor  may  use  all  means 
which  his  wealth,  his  connections,  his  study,  his  superior  skill 
or  knowledge  may  give  him. 

Awards  of  Competition. 

The  law  not  only  allows,  but  it  awards,  and  by  all  means 
protects  the  winner  in  the  acquisition  and  use  of  the  prize 
he  gains  by  competition.  E"o  matter  how  great  the  prize  is, 
the  law  allows  it  and  protects  it  because,  unless  that  be  so, 
competition  would  fail,  for  if  the  man  who  enters  the  lists  and 
wins  at  the  combat  is  not  entitled  to  the  trophy,  there  would  be 
few  lists  organized  and  few  men  would  submit  themselves 
to  the  work  and  the  labor  and  the  inconvenience  of  the 
strife.  Trade  would  be  meaningless,  and  the  incentive  to 
industry  and  perseverance  would  be  destroyed. 

However  large  a  percentage  then  of  interstate  trade  the 
individual  or  the  combine  or  the  corporation  or  the  trust  may 
gain,  even  though  it  should  exceed  eighty  per  cent.,  such  does 
not  create  a  monopoly  in  violation  of  the  Sherman  Act  unless 
unlawful  means  have  been  used  to  gain  that  result. 

In  United  States  vs.  Freight  Association,  166  U.  S.,  290, 
337,  Mr.  Justice  Peckham  quoted  with  approval  the  language 
of  Judge  Shiras'  dissent  from  the  decision  of  the  Circuit 
Court  of  Appeals: 

"Competition,  free  and  unrestricted,  is  the  general 
rule  which  governs  all  the  ordinary  business  pursuits  and 
transactions  of  life.  Evils,  as  well  as  benefits,  result 
therefrom.  In  the  fierce  heat  of  competition,  the 
stronger  competitor  may  crush  out  the  weaker;  fluctua- 
tions in  prices  may  be  caused  that  result  in  wreck  and 
disaster ;  yet,  balancing  the  benefits  as  against  the  evils, 


—192— 

the  law  of  competition  remains  as  a  controlling  element 
in  the  business  world." 


In  Allen  vs.  Flood,  L.  R,  1898,  App.  Cas.  1,  166,  a  case 
before  the  House  of  Lords,  Lord  Shand  said  the  right  to 
trade  is  subject  to 

"competition  which  in  itself  is  lawful,  and  which  cannot 

be  complained  of  where  no  unlawful  m,eans  have  been 

employed," 
and  defined  unlawful  means  as 

"improper  means,  by  which  I  mean  he  used  either  fraud 

or  violence." 


In  Commonwealth  vs.  Hunt,  4  Mete.  Ill,  134,  Chief  Jus- 
tice Shaw  said: 

"Associations  may  be  entered  into  the  object  of 
which  is  to  adopt  measures  that  may  have  a  tendency  to 
impoverish  another — that  is,  to  diminish  his  gains  and 
profits,  and  yet,  so  far  from  being  criminal  or  unlawful, 
the  object  may  be  highly  meritorious  and  public  spirited. 
The  legality  of  such  an  association  will  therefore  depend 
upon  the  means  to  be  used  for  its  accomplishment.  If 
it  is  to  be  carried  into  effect  by  fair  or  honorable  and 
lawful  means,  it  is,  to  say  the  least,  innocent ;  if  by  false- 
hood  or  force,  it  may  be  stamped  with  the  character  of 
conspiracy." 

It  would  seem  that  this  should  be  the  rule.  Its  only  limi- 
tation is  unlawfulness.  It  could  not  be  free  and  unrestricted 
if  it  were  limited  by  fair  or  due  or  reasonable.  It  could  not 
be  full  and  free  if  it  were  limited  by  fair  or  due  or  reasonable. 


—193— 

Mart  el  vs.  White,  185  Mass.  255,  infra. 

If  you  say  that  the  limitation  of  competition  is  that 
which  is  unlawful,  you  have  a  definite,  clear  boundary  de- 
fined. If  you  say,  however,  that  the  competition  must  be  fair 
and  the  competition  must  be  reasonable,  who  will  determine 
what  is  fair  and  what  is  reasonable  ?  Will  each  jury  in  each 
case  have  its  own  standard  ?  Will  each  judge  in  each  case  set 
up  his  separate  standard  ?  If  so,  how  can  the  trader  regulate 
his  competition,  and  how  can  he  tell  what  he  may  do  tomor- 
row in  endeavoring  to  capture  for  himself  a  portion  of,  say, 
the  summer  trade? 


Citizens  Light,  Heat  &  Power  Company  vs.  Mont- 
gomery Light  &  Water  Power  Company,  171  Fed.  553 
(July  22,  1909)  : 

"At  common  law  a  trader,  or  person  in  other  cal- 
lings in  order  to  get  another  man's  customers,  could  use 
any  means  not  involving  violation  of  the  criminal  laws, 
or  amounting  to  'fraud/  'duress/  or  'intimidation/  as 
the  law  understands  and  applies  those  terms  to  trans- 
actions between  man  and  man,  or  to  his  becoming  a 
wrongful  party  to  a  breach  of  another  man's  contract. 
The  trader  may  boast  untruthfully  of  the  merits  of  his 
wares,  so  long  as  it  does  not  take  the  form  of  false 
statements,  amounting  to  slander  or  wilful  misrepre- 
sentation of  the  quality  of  a  rival  product,  or  a  libel 
upon  the  character,  business  standing,  and  credit  of  his 
rival,  or  an  effort  to  induce  the  public  to  believe  that 
the  product  he  sells  is  that  manufactured  and  sold  by 
the  rival.  He  may  send  out  circulars,  or  give  infor- 
mation verbally,  to  customers  of  other  men,  knowing 
they  are  bound  by  a  contract  for  a  definite  term,  al- 
though acting  upon  the  expectation  and  with  the  pur- 


—194— 

pose  of  getting  the  trade  of  such  persons  for  himself. 
He  may  use  any  mode  of  persuasion  with  such  a  cus- 
tomer, keeping  within  the  limitations  stated,  which  ap- 
peals to  his  self-interest,  reason,  or  even  his  prejudices. 
He  may  descant  upon  the  extent  of  his  rival's  facili- 
ties compared  with  his  own,  his  rival's  means,  his  in- 
solvency, if  it  be  a  fact,  and  the  benefits  which  will  re- 
sult to  the  customer  in  the  future  from  coming  to  the 
solicitor  rather  than  remaining  where  he  is.  He  may 
lawfully  at  least  so  far  as  his  rival  is  concerned,  cut 
prices  to  any  extent,  to  secure  his  trade.  So  long  as 
what  he  does  is  done  to  benefit  his  own  trade  and,  in 
taking  over  the  customers  of  another,  he  keeps  within 
the  limitations  heretofore  defined,  he  is  safe  from  legal 
restraint  at  the  instance  of  a  competitor  in  following 
'the  law  of  competition/  which  takes  little  note  of  the 
ordinary  rules  of  good  neighborhood,  or  abstract  moral- 
ity. The  person  whose  customers  are  thus  taken  from 
him  cannot  complain,  for  no  right  of  action  lies  in 
his  favor  against  him  who  solicited  his  customer,  since 
the  solicitor  exercised  a  legal  right  in  a  legal  way,  and 
the  exercise  of  a  legal  right  in  a  legal  way,  for  a  law- 
ful purpose,  will  not  give  a  cause  of  action." 

(p.  562): 

all   competition,   more   or   less,   dimin- 
ishes, restrains,  or  restricts  the  trade  of  others. 

(p.  563): 

"*  *  *  At  the  common  law  all  competition  in 
trade  conducted  within  the  limits  of  the  law,  was  'rea- 
sonable competition.  Mogul  Steamship  Co.  vs.  Mc- 
Gregor, supra.  The  'control'  of  a  pursuit  or  trade  in  a 
locality  is  not  forbidden  by  the  Constitution,  though  it 
be  lodged  in  a  single  hand,  if  that  be  the  result  of  compe- 


—195— 

iition  waged  by  lawful  means.  Such  a  monopoly  is  not 
an  unlawful  monopoly.  Contracts  or  agreements  be- 
tween two  or  more  persons  to  obtain  such  a  result,  or 
to  keep  up  prices,  are,  of  course,  unenforceable,  and 
statutes  frequently  make  them  not  only  illegal,  but 
criminal ;  but  fiercely  waged  competition  between  rivals, 
within  the  limits  of  the  law,  may  bring  about  just  such 
results.  The  law  does  not  condemn  them,  for  they  are, 
in  the  nature  of  things,  the  inevitable  results  of  the 
'reasonable  competition/  which  the  Constitution  secures 
to  all  alike.  If,  as  we  have  seen,  one  of  these  compet- 
ing companies,  keeping  within  lawful  means,  may  con- 
tinue to  compete  with  the  other  until  it  drives  it  out 
of  business  altogether,  and  thus  lawfully  secures  a 
monopoly  to  itself,  advertisement  in  the  newspapers  or 
in  other  ways,  of  a  purpose  to  continue  the  struggle  until 
that  result  is  secured,  cannot  make  that  an  unlawful 
monopoly,  which  without  that  announcement  would  be 
lawful/' 

In  National  Protective  Association  vs.  Gumming,  170 
1ST.  Y.,  315,  58  L.  R.  A.  135,  142,  Chief  Justice  Parker  said: 
"A  man  has  a  right,  under  the  law,  to  start  a  store, 
and  to  sell  at  such  reduced  prices  that  he  is  able  in  a 
short  time  to  drive  the  other  storekeepers  in  his  vicinity 
out  of  business,  when,  having  possession  of  the  trade, 
ho  finds  himself  soon  able  to  recover  the  loss  sustained 
while  ruining  the  others.  Such  has  been  the  law  for 
centuries.  The  reason,  of  course,  is  that  the  doctrine 
has  generally  been  accepted  that  free  competition  is 
worth  more  to  society  than  it  costs,  and  that  on  this 
ground  the  infliction  of  damages  is  privileged.  Com. 
vs.  Hunt,  4  Met.,  Ill,  134,  38  Am.  Dec.,  346.  JSTor 
could  this  storekeeper  be  prevented  from  carrying  out 


—196— 

his  scheme  because,  instead  of  hiding  his  purpose,  he 
openly  declared  to  those  storekeepers  that  he  intended 
to  drive  them  out  of  business  in  order  that  he  might 
later  profit  thereby.  Nor  would  it  avail  such  store- 
keepers, in  the  event  of  their  bringing  an  action  to  re- 
strain him  from  accomplishing  their  ruin  by  under- 
selling them,  to  persuade  the  trial  court  to  characterize 
the  notification  as  a  'threat/  for  on  review  the  answer 
would  be,  'A  man  may  threaten  to  do  that  which  the 
laic-  says  he  may  do,  provided  that,  within  the  rules  laid 
down  in  those  cases,  his  motive  is  to  help  himself." 


The  unlawful  competition  was  outlined  by  Lord  Bowen 
in  the  Mogul  Steamship  Case,  23  Q.  B.,  Div.  614,  as  fraud, 
misrepresentation,  intimidation,  violence,  molestation.  He 
scouted  the  idea  of  fair  or  reasonable  competition. 

(This  case  is  quoted  at  length  in  the  Appendix,  p.  32). 

Montgomery  Ward  &  Co.  vs.  South  Dakota  Retail  Asso- 
ciation, 150  Fed.  413,  41Y. 


A  number  of  retail  dealers  organized  an  association  and 
agreed  not  to  purchase  merchandise  from  wholesalers  who 
sold  to  mail  order  houses. 


They  sent  circular  letters  to  wholesalers  requesting 
them  not  to  sell  to  mail  order  houses,  and  also  circular  letters 
to  their  own  members  informing  them  of  the  wholesalers  who 
refused  to  comply  with  their  request. 


—197— 

It  was  held  that  the  plaintiff,  who  conducted  a  mail  order 
business,  was  not  entitled  to  enjoin  the  defendant  from  com- 
mitting these  acts,  the  court  saying: 

"It  must  be  remembered  that  the  retail  dealers  and 
complainant  are  competitors  in  business,  and  that  the  re- 
tail dealers  have  committed  the  acts  shown  by  the  evi- 
dence, for  the  purpose  of  protecting  their  own  interests, 
so  that  the  retail  dealers  do  not  stand  in  the  position  that 
a  combination  of  persons  would  who  had  no  interest  of 
their  own  to  protect." 


United  States  vs.  Atchison,  T.  &  8.  F.  By.  Co.,  142  Fed. 
176,  184;  Phillips,  District  Judge: 

"The  statute,  by  no  expression  or  implication,  inter- 
dicts the  increase  of  a  railroad's  business  by  any  com- 
petition, however  energetic,  eager  or  grasping.  The 
es&ence  of  the  charge  in  the  bill  of  complaint  is  that  the 
defendant,  by  carrying  in  fact  at  a  rate  below  that  estab- 
lished and  published,  tried  to  get  all  the  transportation  it 
could  of  the  designated  products.  In  the  Trans-Missouri 
here  touching  the  Sherman  Act,  it  seeks  to  enjoin  the 
defendant  from  doing  the  very  act  which,  in  the  Trans- 
Joint  Traffic  Association  Cases  the  reasoning  of  the  court 
was  that  the  agreement  there  involved  directly  tended  to 
obstruct  free  competition.  By  the  portion  of  the  bill 
Missouri  Joint  Traffic  case,  the  court  held  to  be  unlawful 
in  repressing." 


—198— 

Lough     vs.     Outerbridge,     143     K     Y.,     271,     283: 

O'Brien,  J. : 

"This  means  adopted  for  this  purpose  was  to  offer 
the  service  to  the  public  at  a  loss  to  themselves  whenever 
the  competition  was  to  be  met  and  when  it  disappeared 
to  resume  the  standard  rates,  which,  upon  the  record,  did 
not  at  any  time  exceed  a  reasonable  and  fair  charge.  I 
cannot  perceive  anything  unlawful  or  against  the  public 
good  in  seeking  by  such  means  to  retain  a  business  which 
it  does  not  appear  was  of  sufficient  magnitude  to  furnish 
employment  for  both  lines.  On  this  branch  of  the  argu- 
ment the  remarks  of  Lord  Coleridge  in  the  case  of  the 
Mogul  S.  S.  Co.  vs.  McGregor,  supra,  are  applicable: 
'The  defendants  are  traders  with  enormous  sums  of 
money  embarked  in  their  adventure,  and  naturally  and 
allowably  desire  to  reap  a  profit  from  their  trade.  They 
have  a  right  to  push  their  lawful  trades  by  all  lawful 
means.  They  have  a  right  to  endeavor,  by  lawful  means, 
to  keep  their  trade  in  their  own  hands,  and  by  the  same 
means  to  exclude  others  from  its  benefits,  if  they  can. 
Amongst  lawful  means  is  certainly  included  the  induc- 
ing by  profitable  offers  customers  to  deal  with  them  ex- 
clusively rather  than  with  their  rivals.  There  follows 
that  they  may,  if  they  see  fit,  endeavor  to  induce  cus- 
tomers to  deal  with  them  exclusive  by  giving  notice  that 
only  to  exclusive  customers  will  they  give  the  advantage 
of  their  profitable  offers.  I  do  not  think  it  matters  that 
the  withdrawal  of  the  advantages  is  out  of  all  proportion 
to  the  injury  inflicted  by  those  who  withdraw  them  on 
the  customers  who  decline  to  deal  exclusively  with  them 
dealing  with  other  traders." 


—199— 

Bolin  Manufacturing  Co.  vs.  Northwestern  Lumbermen  s 
Association,  54  Minn.,  223.  21  L.  K.  A.,  337,  Mitchell,  J. : 

(339) 

"Now,  when  reduced  to  its  ultimate  analysis,  all 
that  the  retail  lumber  dealers,  in  this  case,  have  done,  is 
to  form  an  association  to  protect  themselves  from  sales 
by  wholesale  dealers  or  manufacturers,  directly  to  con- 
sumers or  other  non-dealers,  at  points  where  a  member 
of  the  association  is  engaged  in  the  retail  business.  The 
means  adopted  to  effect  this  object  are  simply  these : 

They  agree  among  themselves  that  they  will  not  deal 
with  any  wholesale  dealer  or  manufacturer  who  sells 
directly  to  customers,  not  dealers,  at  a  point  where  a 
member  of  the  association  is  doing  business,  and  provide 
for  notice  being  given  to  all  their  members  whenever  a 
wholesale  dealer  or  manufacturer  makes  any  such  sale.77 
(339-340) 

"1.  The  mere  fact  that  the  proposed  acts  of  the 
defendants  would  have  resulted  in  plaintiff's  loss  of  gains 
and  profits,  does  not,  of  itself,  render  those  acts  unlawful 
or  actionable.  That  depends  on  whether  the  acts  are,  in 
and  of  themselves  unlawful.  'Injury/  in  its  legal  sense, 
means  damage  resulting  from  an  unlawful  act. 

Associations  may  be  entered  into,  the  object  of  which 
is  to  adopt  measures  that  may  tend  to  diminish  the  gains 
and  profits  of  another,  and  yet,  so  far  from  being  unlaw- 
ful, they  may  be  highly  meritorious.  Com.  vs.  Hun,  4 
Met.  Ill,  38  Am.  Dec.  346 ;  Mogul  8.  8.  Co.  vs.  McGre- 
gor, L.  E.  21  Q.  B.  Div.  544. 

"2.  If  any  act  be  lawful,  one  "that  the  party  has 
a  legal  right  to  do,  the  fact  that  he  may  be  actuated 
by  an  improper  motive  does  not  render  it  unlawful.  As 
said  in  one  case,  'the  exercise  by  one  man  of  a  legal  right 
cannot  be  a  legal  wrong  to  another,7  or,  as  expressed  in 
another  case,  'malicious  motives  make  a  bad  case  worse, 
but  they  cannot  make  that  wrong  which,  in  its  own 


—200— 

essence,  is  lawful.7  Heywood  vs.  Tillson,  75  Me.  225, 
46  Am.  Rep.  373 ;  Phelps  vs.  Nowlen,  72  K.  Y.  39,  28 
Am.  Rep.  93 ;  Jenkins  vs.  Fowler,  24  Pa.  208.  *  *  *" 
"4.  What  one  man  may  lawfully  do  singly,  two  or 
more  may  lawfully  agree  to  do  jointly.  The  number 
who  unite  to  do  the  act  cannot  change  its  character  from 
lawful  to  unlawful.  The  gist  of  a  private  action  for 
the  wrongful  act  of  many  is  not  the  combination  or  con- 
spiracy, but  the  damage  done  or  threatened  to  the  plain- 
tin"  by  the  acts  of  the  defendants.  If  the  act  be  unlawful, 
the  combination  of  many  to  commit  it  may  aggravate  the 
injury,  but  cannot  change  the  character  of  the  act.  In  a 
few  cases  there  may  be  some  loose  remarks  apparently  to 
the  contrary,  but  they  evidently  have  their  origin  in  a 
confused  and  inaccurate  idea  of  the  law  of  criminal  con- 
spiracy, and  in  failing  to  distinguish  between  an  un- 
lawful act  and  a  criminal  one.  It  can  never  be  a  crime 
to  combine  to  commit  a  lawful  act,  but  it  may  be  a  crime 
for  several  to  conspire  to  commit  an  unlawful  act,  which, 
if  done  by  one  individual  alone,  although  unlawful, 
would  not  be  criminal.  Hence,  the  fact  that  the  defend- 
ants associated  themselves  together  to  do  the  act  com- 
plained of  is  wholly  immaterial  in  this  case." 


Macauley  Brothers  vs.  Tiemey,  19  R.  I.,  225,  37  L.  R. 
A.  455: 

The  members  of  a  national  association  of  plumbers 
agreed  not  to  buy  from  wholesale  dealers  who  sold  to  plumbers 
who  were  not  members,  and  sent  notices  to  this  effect  to  all 
wholesale  dealers. 

The  Court  held  that  these  acts  did  not  constitute  an  un- 
lawful conspiracy,  following  the  Mogul  Steamship  Case. 


—201— 

Chief  Justice  Matteson  said:      (459) 

"The  cause  and  excuse  for  sending  of  the  notices, 
it  is  evident,  was  a  selfish  desire  on  the  part  of  the  mem- 
bers of  the  association  to  rid  themselves  of  the  competi- 
tion of  those  not  members  with  a  view  to  increasing  the 
profits  of  their  own  business.  The  question,  then,  re- 
solves itself  into  this :  Was  the  desire  to  free  themselves 
from  competition  a  sufficient  excuse,  in  legal  contempla- 
tion for  the  sending  of  the  notices  ?  We  think  the  ques- 
tion must  receive  an  affirmative  answer.  Competition, 
it  has  been  said,  is  the  life  of  trade.  Every  act  done  by 
a  trader  for  the  purpose  of  diverting  trade  from  a  rival, 
and  attracting  it  to  himself,  is  an  act  intentionally  done, 
and,  in  so  far  as  it  is  successful,  to  the  injury  of  the 
rival  in  his  business,  since  to  that  extent  it  lessens  his 
gains  and  profits.  To  hold  such  an  act  wrongful  and 
illegal  would  be  to  stifle  competition.  Trade  should  be 
free  and  unrestricted;  and  hence  every  trader  is  left  to 
conduct  his  business  in  his  own  way,  and  cannot  be  held 
accountable  to  a  rival  who  suffers  a  loss  of  profits  by 
anything  he  may  do,  so  long  as  the  methods  he  employs 
are  not  of  the  class  of  which  fraud,  misrepresentation, 
intimidation,  coercion,  obstruction  or  molestation  of  the 
rival  or  his  servants  or  workmen,  and  the  procurement  of 
violation  of  contractual  relations,  are  instances. 
(461)  "To  maintain  a  bill  on  the  ground  of  conspiracy  it 
is  necessary  that  it  should  appear  that  the  object  relied 
on  as  to  the  basis  of  the  conspiracy,  or  the  means  used  in 
accomplishing  it,  were  unlawful.  What  a  person  may 
lawfully  do,  a  number  of  persons  may  unite  with  him 
in  doing,  without  rendering  themselves  liable  to  the 
charge  of  conspiracy,  provided  the  means  employed  be 
not  unlawful.  The  object  of  the  members  of  the  asso- 
ciation was  to  free  themselves  from  the  competition  of 
those  not  members,  which,  as  we  have  seen,  is  not  unlaw- 
ful. The  means  taken  to  accomplish  that  object  were  the 


—202— 

agreement  among  themselves  not  to  deal  with  wholesale 
dealers  who  sold  to  those  not  members  of  the  associations, 
and  the  sending  of  notices  to  that  end  to  the  wholesalers. 
This,  as  we  have  also  seen,  was  not  unlawful.  Hence,  it 
follows  that,  as  the  object  of  the  combination  between 
the  members  of  the  association  was  not  unlawful,  nor 
the  means  adopted  for  its  accomplishment  unlawful, 
there  is  no  ground  for  the  charge  of  conspiracy,  and  the 
fact  of  combination  is  wholly  immaterial." 

West  Virginia  Transportation  Co.  vs.  Standard  Oil  Co., 
50  W.  Va.  611,  56  L.  E.  A.  804,  (1900). 

The  plaintiff  corporation,  engaged  only  in  transporting 
oil  by  means  of  pipe  lines,  brought  an  action  of  tort  against  the 
Standard  Oil  Company.  The  first  count  of  the  dedaration 
charged  that  the  Standard  Oil  Company  had  procured  the 
construction  of  a  pipe  line  through  the  territory  which  had 
formerly  patronized  plaintiff,  and  had  refused  to  purchase  or 
refine  or  receive  in  its  pipe  lines  any  oil  shipped  through 
plaintiff's  line,  thereby  ruining  plaintiff's  business  and  secur* 
ing  a  monopoly  of  the  business  of  refining  and  transporting 
oil.  A  demurrer  to  this  count  was  sustained.  A  second  count 
alleging  in  substance  that  the  defendants  conspired  to  destroy 
plaintiff's  business,  without  showing  the  justification  of  com- 
petition for  plaintiff's  acts,  was  held  not  demurrable. 

Brannon,  J.,  said:    (807,  809,  810) 

aThere  is  no  right  better  established  under  the  law 
of  business  than  the  right  of  trade  competition.  Mogul 
8.  S.  Co.  vs.  McGregor,  L.  B.  21  Q.  B.  T)iv.  544,  L.  E., 
23  Q.  B.  Div.  598.;  Huttley  vs.  Simons  (1898),  1  Q. 
B.  181.  These  companies  were  owned  by  the  same  men. 
Their  interests  were  common — one  buying,  refining  and 
selling  oil ;  the  other  transporting  it.  I  mean  the  de- 


-203- 


fendant  companies.  Had  they  not  a  right  to  work  to- 
gether  io  promote  the  common  interests — even  to  con- 
spire to  draw  to  themselves  from  other  competitors7  busi- 
ness, so  they  did  no  unlawful  act?  The  count  charges 
an  arrangement  designed  to  form  a  monopoly  to  control 
or  dominate  the  business  of  purchasing,  producing,  refin- 
ing and  selling  oil.  Everyone  has  a  right  to  enlarge  his 
business,  even  though,  by  means  of  greater  capital,  supe- 
rior facilities  and  capacity  he  monopolizes  business  and 
injure  competitors.  If  the  business  is  lawful,  so  that 
it  violates  no  state  law,  even  if  it  overshadow  others,  who 

can  prevent  it  in  a  free  country  of  constitutional  law? 
****** 

(810)  "Now  these  companies  were  furthering 
their  own  interests  in  lawful  competition  with  others.  If 
they  possessed  the  lawful  right  above  stated,  what  matters 
it  that  they  did  have  the  intent  to  cut  down  the  business 
of  others,  or  that  they  did  cut  it  down  and  injure  others, 
though  they  did  this  that  they  might  themselves  fatten  ? 
So  far  this  first  count  charges  only  the  exercise  by  the 
defendants  of  a  right  of  constitutional  liberty,  accorded 
alike  to  all — simply  the  right  of  self-advancement  in  le- 
gitimate business — self  preservation,  we  may  say.  That 
in  these  days  of  sharp,  ruinous  competition  some  perish  is 
inevitable.  The  dead  are  found  strewn  all  along  the 
highways  of  business  and  commerce.  Has  it  not  always 
been  so  ?  Will  it  always  be  so  ?  The  evolution  of  the 
future  must  answer.  What  its  evolution  will  be  in  this 
regard  we  do  not  yet  know,  but  we  do  know  that  thus 
far  the  law  of  the  survival  of  the  fittest  has  been  inex- 
orable. *  *  * 

"I  understand  the  law  to  be  as  follows :  One 
may  without  liability  induce  the  customers  of  another  to 
withdraw  their  custom  from  him,  in  the  race 
of  competition,  in  order  that  the  former  may 


—204— 

himself  get  the  custom,  there  being  no  contract;  and 
it  is  no  matter  that  such  party  is  injured,  and 
it  is  no  matter  that  the  other  party  was  moved  by  express 
intent  to  injure  him;  motive  being  immaterial  where  the 
act  is  not  unlawful.  But  where  the  act  is  not  done 
under  the  right  of  competition,  or  under  the  cover  of 
friendly,  neighborly  counsel,  but  wantonly  or  maliciously 
with  intent  to  injure  another,  it  is  actionable,  if  loss  en- 
sue. Nor  is  it  material  in  the  latter  case  that  there  was 
no  binding  contract  between  the  business  man  and  his 
customers.  He  cannot  interfere  even  for  his  own  benefit, 
if  there  is  a  contract." 


Martell  vs.  White,  185  Mass.,  255,  64  L.  R.  A.,  260, 
263,  1904,  Hammond,  J.,  said: 

"The  right  of  competition  rests  upon  the  doctrine 
that  the  interests  of  the  great  public  are  best  subserved 
by  permitting  the  general  and  natural  laws  of  business  to 
have  their  full  and  free  operation,  and  that  this  end  is 
best  attained  when  the  trader  is  allowed,  in  his  business, 
to  make  FREE  use  of  these  laws.  He  may  praise  his 
wares,  may  cffer  more  advantageous  terms  than  his  rival, 
may  sell  at  less  than  cost,  or,  in  the  words  of  Bowen,  L. 
J.  in  the  Mogul  S.  S.  Case,  L.  R.  23  Q.  B.  Div.  615,  may 
adopt  the  'expedient  of  sowing  one  year  a  crop  of  appar- 
ently unfruitful  prices,  in  order,  by  driving  competition 
away,  to  reap  a  fuller  harvest  of  profit  in  the  future.'  In 
these  and  many  other  obvious  ways  he  may  secure  the 
customers  of  his  rival,  and  build  up  his  own  business 
to  the  destruction  of  that  of  others;  and,  so  long  as  he 
keeps  within  the  operation  of  the  laws  of  trade,  his  justi- 
fication is  complete." 


—205— 

In  Vegelahn  vs.  Guntner,  1G7  Mass.,  92,  1906,  Mr.  Jus- 
Holmes  said: 

"*  *  *  the  doctrine  generally  has  been  accepted  that 
free  competition  is  worth  more  to  society  than  it  costs, 
and  that  on  this  ground  the  infliction  of  the  damage  is 
privileged.  Commonwealth  vs.  Hunt,  4  Met.  Ill,  134." 


Allen  vs.  Flood,  L.  K.  1898,  App.  Case,  1,  166 ;  Lord 
Shand,  addressing  the  House  of  Lords,  said: 

*  *  a  trader  has  a  right  to  trade  without  hin- 
drance. That  right  is  subject  to  the  right  of  others  to 
trade  also,  and  to  subject  him  to  competition — competi- 
tion, wliich  is  in  itself,  lawful — and  which  cannot  be 
complained  of  where  no  unlawful  means  (in  the  sense  I 
have  already  explained)  have  been  employed.  The  mat- 
ter has  been  settled  insofar  as  competition  in  trade  is  con- 
cerned by  the  judgment  of  this  House  in  the  Mogul 
Steamship  Co.  Case." 


His  Lordship  had  defined  illegal  means,  on  page  162,  as 
''improper  means,  by  which  I  mean  that  he  (the  defend- 
ant) used  neither  fraud  nor  violence." 


Tn  Ajello  vs.  Worsley,  1898,  1  Ch.  274,  280,  Mr.  Jus- 
tice Stirling  said,  that  a  seller 

*  *  is  entitled  to  make  the  offer  at  any  price  he 
chooses,  whether  remunerative  or  not;  it  may  be  worth  a 
trader's  while  to  sell  some  goods  at  a  loss  so  long  as  he  is 
able  to  sell  other  goods  at  a  countervailing  or  more  than 
countervailing  profit." 


—206— 

The  effect  of  the  late  English  decisions  is  thus  summar- 
ized by  Sir  Frederick  Pollock  in  his  treatise  on  the  Law  of 
Torts  (8th  Ed.)  page  152: 

"A  trader  can  complain  of  his  rival  only  if  a  defi- 
nite exclusive  right,  such  as  a  patent-right,  or  the  right 
to  a  trade-mark,  is  infringed,  or  if  there  is  a  wilful  at- 
tempt to  damage  his  business  by  injurious  falsehood 
("slander  of  title")  or  acts  otherwise  unlawful  in  them- 
selves. Underselling  is  not  a  wrong,  though  the  seller 
may  purposely  sell  some  article  at  unremunerative  prices 
to  attract  custom  for  other  articles ;  nor  is  it  a  wrong  even 
to  offer  advantages  to  customers  who  will  deal  with  one- 
self to  the  exclusion  of  a  rival. 

"'To  say  that  a  man  is  to  trade  freely,  but  that  he 
has  to  stop  short  at  any  act  which  is  calculated  to  harm 
other  tradesmen,  and  which  is  designed  to  attract  their 
business  to  his  own  shop,  would  be  a  strange  and  impos- 
sible counsel  of  perfection. 

"To  draw  a  line  between  fair  and  unfair  competi- 
tion, between  what  is  reasonable  and  unreasonable,  passes 
the  power  of  the  courts.  Competition  exists  where  two 
or  more  persons  seek  to  possess  or  enjoy  the  same  thing. 
It  follows  that  the  success  of  one  must  be  the  failure  of 
another,  and  no  principle  of  law  enables  us  to  interfere 
with  or  to  moderate  that  success  or  that  failure  so  long 
as  it  is  due  to  mere  competition.  There  is  'no  restric- 
tion imposed  by  law  on  competition  by  one  trader  with 
another  with  the  sole  object  of  benefiting  himself/' ' 


—207— 


RIGHTS  OF  CITIZENS  OF  THE 
UNITED  STATES. 

It  is  the  right  of  every  citizen  of  the  United  States  to 
engage  in  interstate  commerce,  and  to  use  all  lawful  and  legiti- 
mate means  to  gain  so  much  of  that  interstate  trade  as  he  or 
his  partnership  or  corporation  may.  It  is  one  of  the  natural 
indefeasible  rights  of  an  American  citizen  so  to  do. 

The  Constitution  itself  was  framed,  among  other  things, 
"to  secure  the  blessings  of  liberty  to  ourselves  and  our 
posterity." 

The  Declaration  of  Independence  declared 
"as  self  evident" 
truths 

"that  all  men  are  created  equal;  that  they  are  endowed 
by  their  Creator  with  certain  inalienable  rights;  that 
among  these  are  life,  liberty  and  the  pursuit  of  happi- 


Article  4,  section  2,  provides  that : 

"The  citizens  of  each  state  shall  be  entitled  to  all  privi- 
leges and  immunities  of  citizens  in  the  several  states." 

The  Fifth  Amendment  provided  that, 
"No  person  shall  be     *     *     *     deprived  of  life,  liberty 
or  property  without  due  process  of  law,  nor  shall  private 
property  be  taken  for  public  use  without  just  compensa- 
tion." 


—208— 

The  Fourteenth  Amendment  added : 
"No  state  shall  make  or  enforce  any  law  which  shall 
abridge  the  privileges  or  immunities  of  citizens  of  the 
United  States;  nor  shall  any  state  deprive  any  person  of 
life,  liberty  or  property,  without  due  process  of  law,  nor 
deny  to  any  person  within  its  jurisdiction  the  equal 
protection  of  the  laws." 

The  courts  have  construed  these  provisions  as  giving  to 
each  citizen  the  fundamental  privileges  and  immunities  which 
belong  of  right  to  the  citizens  of  all  free  governments,  and 
which  have,  at  all  times,  been  enjoyed  by  the  citizens  of  the 
several  states.  Among  these  fundamentals  are  the  right  of  a 
citizen  of  one  state  to  pass  through  or  to  reside  in  any  other 
state  for  the  purposes  of  trade ;  to  take,  hold,  use  and  dispose 
of  property. 

Each  citizen  is  entitled  to  protection  by  the  Govern- 
ment in  his  enjoyment  of  life,  property  and  liberty,  and  this 
includes  the  fundamental  right  to  engage  in  interstate  trade. 

In  the  Slaughter  House  Cases,  16  Wallace,  116,  Mr.  Jus- 
tice Bradley  said: 

aThe  rights  of  life,  liberty  and  pursuit  of  happiness 
are  equivalent  to  the  rights  of  life,  liberty  and  property. 
For  the  preservation,  exercise  and  enjoy- 
ment of  these  rights  the  individual  citizen  as  a  necessity 
must  be  left  free  to  adopt  such  calling,  profession  or 
trade  as  may  seem  to  him  most  conducive  to  that  end. 
Without  this  right  he  cannot  be  a  freeman.  This  right 
to  choose  one's  calling  is  an  essential  part  of  that  liberty 
which  it  is  the  object  of  government  to  protect,  and  a  call- 
ing when  chosen  is  a  mans  PROPERTY  and  right. 
Liberty  and  property  are  not  protected  where  these  rights 
are  arbitrarily  assailed." 


—209— 

In  Thomas  vs.  Cincinnati  By.  Co.,  62  Fed.  Eep.,  803- 
819,  Judge  Taft  said: 

"Every  man,  be  he  capitalist,  merchant,  employer, 
laborer  or  professional  man,  is  entitled  to  invest  his  capi- 
tal, to  carry  on  his  business,  to  bestow  his  labor,  or  to 
exercise  his  calling,  if  within  the  law,  according  to  his 
pleasure.  Generally  speaking,  if,  in  the  exercise  of  such 
a  right  by  one  another  suffers  a  loss,  he  has  no  ground 
of  action.  Thus,  if  two  merchants  are  in  the  same  busi- 
ness in  the  same  place,  and  the  business  of  the  one  is 
injured  by  the  competition,  the  loss  is  caused  by  the 
other's  pursuing  his  lawful  right  to  carry  on  business 
as  seems  best  to  him.  In  this  legitimate  clash  of  com- 
mon rights,  the  loss  which  is  suffered  is  damnum  absque 
injuria." 

Conner  vs.  Elliott,  18th  Howard,  591 : 

Ward  vs.  Maryland,  12th  Wallace,  418 ; 

The  Slaughter  House  Cases,  16th  Wallace,  36; 

Cooley's  Const.  Lim.,  p.  37  and  notes. 

Each  citizen  is,  of  course,  subject  to  the  police  laws  of 
the  State,  and  also  to  the  laws  of  Congress  regulating  com- 
merce ;  and  while  the  division  line  between  the  power  of  Con- 
gress to  regulate  and  the  right  of  the  citizen  to  pursue  inter- 
state commerce  is  not  easily  denned,  yet  it  is  still  true  that 
this  power  of  Congress  must  be  used  consistently  with  the  re- 
cognition of  the  rights  of  the  citizen  to  his  fundamental  and 
indefeasible  rights  above  noted. 

Monongahela  Navigation  Co.  vs.  U.  8.,  148  U.  S., 
312. 

It  is  true  that  under  the  Sherman  Act  the  Supreme  Court 
of  the  United  States  has  held  in  the  Trans-Missouri  and  the 
Joint  Traffic  Association  Cases  that  to  some  extent  Congress 
could  restrict,  for  the  good  of  interstate  commerce,  the  liberty 


—210— 

of  the  citizen  to  contract,  but  it  is  respectfully  suggested  that 
that  restriction  of  the  liberty  of  the  citizen  was  in  the  nature 
of  the  restraint  of  an  unlawful  thing;  i.  e.,  Congress  has  an 
undefined  but  most  extensive  power  of  regulating  interstate 
commerce,  and  the  citizen  cannot,  by  his  contract,  agree  with 
some  other  citizen  to  restrain  that  regulation,  and  the 
contract  that  so  restrains  is  ipso  facto  void,  and  therefore 
illegal ;  and  Congress  may  so  declare,  and  this  because  the  very- 
subject  matter  of  the  contract  puts  it  pecularily  within  power 
of  Congress  to  regulate  if  it  deems  proper.  The  contract  in- 
vades the  territory  of  Congress,  and  hence  subjects  itself  to 
Congressional  regulation  in  the  nature  of  the  police  laws. 

The  indefeasible  right  of  the  citizen  to  engage  in  inter- 
state commerce  is  not  denied,  but,  like  his  holdings  of  property 
in  the  state,  it  is  subject  to  the  police  laws  as  to  property  in  the 
State,  is  subject  to  the  laws  of  Congress  as  to  the  regulation  of 
the  use  of  this  acknowledged  right.  No  hard  and  fast  line  can 
be  drawn  to  determine  the  boundary  line  between  the  indefeas- 
ible right  of  the  citizen  to  engage  in  the  trade  and  the  power 
of  Congress  to  regulate  and  control,  and  to  some  extent,  re- 
strain ;  but  it  is  still  indisputably  true  that  both  of  these  rights 
exist,  are  related  to  each  other,  have  equal  recognition  in  the 
Federal  Constitution,  and  must  receive  reasonable  treatment 
and  recognition  by  the  Federal  Courts  and  Congress,  and 
that  Congress  has  not  as  yet  restricted  the  percentage  of  inter- 
state or  foreign  trade  which  any  citizen  of  the  United  States 
may  control. 


Uses  of  Property. 

The  right  of  the  citizen  to  be  protected  in  his  property 
includes  all  the  elements  which  go  to  make  it  up.  Thus  the 
use  of  property  is  an  essential  element  of  ownership.  Indeed, 
the  property  is  of  value  only  as  one  may  use  it.  If  one  be  re- 


—211— 

stricted  in  its  use — be  prevented  from  using  it — as  he  sees 
fit,  his  rights  and  property  would  amount  to  little  and  his 
liberty  be  controlled. 

Slaughter  House  Cases,  16  Wall.,  36,  127: 

"The  right  of  property  includes  the  power  to  dispose  of 

it  according  to  the  will  of  the  owner." 


THE  FREEDOM  TO  USE  AND  SELL  IN- 
CLUDES THE  METHODS  OF  HOLDING  TITLE 
WHETHER  AS  TENANTS  IN  COMMON  OR 
JOINT  TENANTS  OR  MERELY  AS  CESTUIS 
QUE  TRUSTENT. 

Congress  cannot  constitutionally  prohibit  individuals 
from  uniting  to  secure  community  of  interest*  and  in  the 
Sherman  Act  has  not  attempted  to  prohibit  individuals  from 
uniting  to  secure  community  of  interest  in  carrying  on 
business. 

In  re  Greene,  52  Fed.,  104,  Judge  Jackson: 
(p.  115). 

"It  is  very  certain  that  Congress  could  not  and  did 
not,  by  this  enactment,  attempt  to  prescribe  limits  to 
the  acquisition,  either  by  private  citizen  or  state  corpora- 
tion, of  property  which  might  become  the  subject  of 
interstate  commerce,  or  declare  that,  when  the  accumu- 
lation or  control  of  property  by  legitimate  means  and 
lawful  methods  reached  such  magnitude  or  proportions 
as  enabled  the  owner  or  owners  to  control  the  traffic 
therein,  or  any  part  thereof,  among  the  states,  a  criminal 
offense  was  committed  by  such  owner  or  owners.  *  *  * 
(p.  112)  Congress  may  place  restrictions  and  limitations 
upon  the  right  of  corporations  created  and  organized 
under  its  authority  to  acquire,  use,  and  dispose  of  prop- 


—212— 

erty.  It  may  also  impose  such  restrictions  and  limita- 
tions upon  the  citizen  in  respect  to  the  exercise  of  a 
public  privilege  or  franchise  conferred  by  the  United 
States.  But  Congress  certainly  has  not  the  power  or 
authority  under  the  commerce  clause,,  or  any  other  pro- 
vision of  the  constitution,  to  limit  and  restrict  the  right 
of  corporations  created  by  the  states,  or  the  citizens  of 
the  states,  in  the  acquisition,  control  and  disposition  of 
property." 


Northern  Securities  Co.  vs.  United  States,  193  U.  S., 
19,  361,  Brewer,  J. : 

"Further,  the  general  language  of  the  act  is  also 
limited  by  the  power  which  each  individual  has  to  man- 
age his  own  property  and  determine  the  place  and  man- 
ner of  its  investment.  Freedom  of  action  in  these  re- 
spects is  among  the  inalienable  rights  of  every  citizen. 
If,  applying  this  thought  to  the  present  case,  it  appeared 
that  Mr.  Hill  was  the  owner  of  a  majority  of  the  stock 
in  the  Great  Northern  Railway  Company  he  could  not 
by  any  acts  of  Congress  be  deprived  of  the  right  of  in- 
vesting his  surplus  means  in  the  purchase  of  stock  of 
the  Northern  Pacific  Railway  Company,  although  such 
purchase  might  tend  to  vest  in  him  through  that  owner- 
ship a  control  over  both  companies.  In  other  words,  the 
right,  which  all  other  citizens  had,  of  purchasing  North- 
ern Pacific  stock  could  not  be  denied  to  him  by  Con- 
gress because  of  his  ownership  of  stock  in  the  Great 
Northern  Company.  Such  was  the  ruling  in  Pearsall 
vs.  Great  Northern  Railway,  161  U.  S.,  646,  in  which 
this  court  said  (p.  671),  in  reference  to  the  right  of  the 


—213— 

stockholders  of  the  Great  Northern  Company  to 
purchase  the  stock  of  the  Northern  Pacific  Kailway 
Company:  'Doubtless  these  stockholders  could  lawfully 
acquire  by  individual  purchases  a  majority,  or  even  the 
whole  of  the  stock  of  the  reorganized  company,  and  thus 
possibly  obtain  its  ultimate  control;  but  the  companies 
would  still  remain  separate  corporations  with  no  inter- 
ests, as  such,  in  common.' ' 

In  Smiley  vs.  Kansas,  196  U.  S.,  447,  Mr.  Justice 
Brewer  said  (456-457)  : 

"Undoubtedly  there  is  a  certain  fredom  of  contract 
which  cannot  be  destroyed  by  legislative  enactment.  In 
pursuance  of  that  freedom  parties  may  seefc  to  further 
their  business  interests,  and  it  may  not  be  always  easy 
to  draw  the  line  between  those  contracts  which  are  be- 
yond the  reach  of  the  police  power  and  those  which  are 
subject  to  prohibition  or  restraint.  But  a  secret  ar- 
rangement, by  which,  under  penalties,  an  apparently  ex- 
isting competition  among  all  the  dealers  in  a  community 
in  one  of  the  necessaries  of  life  is  substantially  destroy- 
ed, without  any  merging  of  interests  through  partner- 
ship or  incorporation,  is  one  to  which  the  police  power 
extends." 

Here  is  the  assertion  that  two  or  more  competitors  in 
PRIVATE  trade  may  unite  and  form  a  partnership  or  cor- 
poration, and  as  such  partnership  or  corporation  for  the  fu- 
ture carry  on  trade.  These  are  rights  of  citizens  of  the 
United  States. 

(See  additional  authorities  in  Appendix,  p.  8). 


—214— 


ANALYSIS  OF  THE  SHERMAN  ACT. 

(For  the  text  of  the  Act  see  Appendix,  page  1). 

The  Sherman  Act  in  its  first  section  is  directed  to  the 
contract,  the  combination,  the  conspiracy  in  restraint  of  trade 
or  commerce  among  the  several  states.  It  is  every*  contract, 
every  combination,  whatever  may  be  its  form,  and  every  con- 
spiracy in  restraint  of  commerce.  It  will  hardly  be  denied 
that  the  contract  then  is  the  basis  of  the  thing  which  section 
one  of  this  act  is  directed  against.  The  combination  neces- 
sarily implies  a  contract  or  agreement  among  those  who  form 
it,  and  the  very  basis  of  the  conspiracy  is  the  breathing  or 
agreeing  together  to  do  a  certain  thing.  It  would  seem  then 
to  be  reasonably  clear  that  what  Congress  meant  by  this  sec- 
tion was  to  strike  at  contracts  either  made  directly  and  form- 
ally, as  in  writing,  and  called  a  contract,  and  made  by  but 
two  or  several,  or  the  larger  form  of  a  contract  where  twelve 
or  more  agree  with  each  other  to  do  a  cetrain  thing,  and 
called  a  combination  or  conspiracy.  The  combination  under 
section  one  is  evidently  the  same  as  the  conspiracy,  because, 
if  the  combination,  whatever  be  its  form,  is  in  restraint 
of  trade,  and  only  such  combinations  are  prohibited,  then 
the  act  declares  it  to  be  illegal,  and  therefore  the  combination 
itself  is  a  conspiracy. 

One  person  could  not  make  a  contract — or  form  a  com- 
bination— or  conspiracy.  It  at  least  would  require  two  or 
more. 

This  is  emphasized  by  the  further  words  in  section  one, 
"in  the  form  of  trust  or  otherwise.'' 
It  does  not  say  in  the  form  of  a  corporation,  but  of 
"a  trust." 


—215— 

This  was  the  combination  where  many  joined  in  re- 
straint of  interstate  trade.  But  one  person  could  not  form 
a  trust;  a  number  may,  and  the  trust  may  consist  of  indi- 
viduals and  corporations.  But  a  single  corporation  cannot 
make  a  trust  in  its  popular  meaning  any  more  than  a  single 
person.  Under  section  8  the  word  "person"  does  include  a 
corporation,  but  only  as  it  includes  an  individual. 

It  seems  clear,  then,  that  the  corporation  is  not  hinted 
at,  much  less  prohibited  by  section  one.  That  it  is  a  cor- 
poration, big  or  little,  does  not  make  it  a  trust,  and  Con- 
gress did  not  say  so  or  mean  to  say  so  by  the  language  used. 


So  far  we  emphasize  the  fact  that  not  only  does  not 
the  Sherman  Act  prohibit  corporations  or  trusts  or  com- 
tmations,  but  it  really  authorizes  their  existence  and 
participation  in  trade. 

In  the  United  States  vs.  Joint  Traffic  Association,  171 
U.  S.,  567,  Mr.  Justice  Peckham  said: 

"*  *  *  we  might  say  that  the  formation  of 
corporations  for  business  or  manufacturing  purposes 
has  never,  to  our  knowledge,  been  regarded  in  the  nature 
of  a  contract  in  restraint  of  trade  or  commerce.  The 
same  may  be  said  of  the  contract  of  partnership." 


In  Smiley  vs.  Kansas,  196  U.   S.,  447,    Mr.    Justice 
Brewer  said)  456-457)  : 

"But  a  secret  arrangement  by  which,  under  pen- 
alties, an  apparently  existing  competition  among  all 
the  dealers  in  a  community  in  one  of  the  necessaries  of 
life  is  substantially  destroyed,  without  any  merging  of 


—216— 

interests  through  partnership  or  incorporation,  is  one 
to  which  the  police  power  extends." 


National  Cotton  Oil  Company  vs.  Texas,  197  U.   S., 
115,  128,  McKenna,  J. : 

"There  are  some  things  which  counsel  easily  dem- 
onstrate. They  easily  demonstrate  that  some  combina- 
tions of  capital,  skill  or  acts  is  necessary  to  any  business 
development,  and  that  the  result  must  inevitably  be  a 
cessation  of  competition/' 


Chesapeake  &  Ohio  Fuel  Company  vs,  United  States, 
115  Fed.,  610,  620,  Day,  Circuit  Judge: 

"Looking  then  to  the  contract  in  question,  we  find 
fourteen  of  the  coal  producers  of  this  district,  whose  ag- 
gregate production  is  5,000  tons  a  clay,  entering  into  an 
agreement  which  without  making  a  partnership,  under* . 
takes  to  control  the  entire  output  of  the  several  mines." 

Northern  Securities  Co.  vs.  United  States,  193  U.  S., 
197,  410,  Holmes: 

"A  partnership  is  not  a  contract  or  combination 
in  restraint  of  trade  between  the  partners  unless  the  well 
known  words  are  to  be  given  a  new  meaning  invented  for 
the  purpose  of  this  act." 

Assuming  now  that  the  Congress  used  the  word  "ille- 
gal" in  this  section  as  equivalent  to  "unlawful,"  which  is 
the  most  favorable  interpretation  for  the  Government,  we 
find  that  this  section  1  of  the  Sherman  Act  declares  to  be 
unlawful  a  contract,  a  combination,  or  a  conspiracy  when 
it  is  in  restraint  of  trade  or  commerce  among  the  several 
states. 


—217— 

Congress  has  several  times  in  this  act  used  the  word 
"restraint"  or  "restrain;"  thus  you  find  it  in  section  1,  "in 
restraint  of  trade/7  you  find  it  again  in  section  3,  "in  re- 
straint of  trade/'  and  twice  used  there.  Then  you  find  the 
word  again  used  in  section  4,  "to  restrain  the  violations  of 
this  act." 

Webster  defines  the  word  restraint:  "The  act  or  power 
of  retaining  or  holding  back  or  hindering  from  motion  or 
action  in  any  manner." 


According  to  a  well  known  rule  of  construction  the  word 
"restraint"  then  wherever  used  receives  the  same  interpreta- 
tion whether  in  the  expression  "in  restraint  of  trade"  or  the 
expression  "to  restrain  the  violations  of  this  act." 

Potter's  Dwarris  on  Statutes,  page  193 : 

"If  the  same  words  occur  in  different  parts  of  a 
statute  or  will,  they  must  be  taken  to  have  been  every- 
where used  in  the  same  sense." 


Wheaton  vs.  Peters,  8  Peters,  591,  661 : 

"There  is  no  mode  by  which  the  meaning  affixed  to 
any  word  or  sentence,  by  a  deliberative  body,  can  be  so 
well  ascertained  as  by  comparing  it  with  the  words  and 
sentences  with  which  it  stands  connected." 

Turning  to  this  first  section  where  Congress  first  used 
the  word,  let  us  look  at  its  context  to  see  if  there  can  be  any 
doubt  as  to  its  meaning. 

"In  restraint  of  trade" 

seems  plain  enough;  it  is  to  pull  back,  to  hinder  or  pre- 
vent trade.  This  seems  also  to  be  its  plain  meaning  in  the 
other  paragraph.  The  context  of  the  first  paragraph  does 


—218—  . 

not  seem  to  vary  in  its  meaning  or  throw  any  additional  light 
on  it,  and  you  then  come  back  and  gather  up  your  words, 
and  you  find  that  Section  1  declares  to  be  unlawful  contracts, 
combinations,  conspiracies  which  actually  do  restrain  inter' 
state  trade. 


In  Hopkins  vs.  United  States,  171  U.  S.,  592,  the  Court 
said: 

"The  contract  condemned  by  the  statute  is  one 
whose  direct  and  immediate  effect  is  a  restraint  upon 
that  kind  of  trade  or  commerce  which  is  interstate. 
*  *  *  There  must  be  some  direct  and  immediate  ef- 
fect upon  interstate  commerce  in  order  to  come  within 
the  act." 

See  many  cases  cited  on  pages  594-598. 

In  the  Joint  Traffic  Case,  171  Lr.  S.,  568,  the  Court 
said  that  the  Sherman  Act 

"applies  only  to  those  contracts  whose  direct  and  im- 
mediate effect  is  a  restraint  upon  interstate  commerce." 


Section  one  prohibits  contracts  which  as  a  fact  re- 
strain interstate  trade. 

To  combine  or  to  conspire  in  restraint  of  interstate  trade 
necessarily  implies  a  contract  or  agreement  so  to  do.  There 
must  be  the  breathing  together,  that  is,  the  agreeing  together 
to  do  a  certain  thing,  and  such  agreement  is  a  contract  to  do 
it;  so  that  this  first  section  relates  to  contracts,  and  really 
only  contracts  in  restraint  of  trade.  This  contractual  rela- 
tion seems  to  be  further  shown  by  the  expression 

"Every  person  who  shall  make   any  such  contract  or 

engage  in  any  such  combination  or  conspiracy  shall  be 

deemed  guilty,"  etc. 


—219— 

The  word  "make"  and  the  words  "engage  in"  signify 
the  same  thing,  the  agreeing  to  do  that  which  amounts  to  a 
restraint  of  trade. 


Here  the  direct  and  formal  making  by  two  or  more  of 
a  formal  contract  is  specifically  mentioned,  and  then  the  ex- 
pression, 

"engage  in  any  such  combination  or  conspiracy," 
follows.  If  I  engage  in  a  conspiracy  or  a  combination,  or 
I  make  an  engagement  of  any  kind,  I  enter  into  a  contractual 
relation;  an  engagement  to  marry  or  an  engagement  of  em- 
ployment. This  adds  to  what  seems  plain  on  the  face  of  it, 
that  it  is  the  agreement  in  restraint  of  trade  by  two  or  many 
that  is  prohibited  by  section  one.  As  Judge  Sanborn,  in 
this  case  in  his  opinion  on  the  order  to  serve  outside  defend- 
ants, said,  if  one 

"operates  with  others  knowing  them  to  have  the  same 

design,  there  is  in  fact  an  agreement  between  him  and 

them/' 


It  will  not  be  overlooked  that  Congress  did  not 
prohibit  combinations  in  trade;  it,  in  fact,  recognized 
their  use  and  legality  when  it  only  made  illegal  those  in 
restraint  of  trade. 


Plainly  it  had  before  it  combinations  which  are  formed 
for  interstate  trade,  and  concluded  that  only  such  of  them 
as  were  by  contract  restraining  interstate  trade  are  hurtful, 
and  it  therefore  made  only  such  illegal. 


—220— 

It  thereby  affirmed  that  combinations  which  do  not  re- 
strain interstate  trade  are  legal — not  in  violation  of  the  law 
or  the  Sherman  Act. 

But,  as  we  have  seen,  even  more  is  apparent.  The  trust 
itself  is  not  made  illegal  or  prohibited.  Only  such  trusts  as 
by  contract  restrain  trade.  Therefore  a  trust  even  composed 
of  corporations  is  not  illegal  unless  it  actually,  by  agreement, 
restrains  interstate  trade. 

Then,  too,  section  one  only  is  directed  against  the  actual 
restraint  of  trade,  not  the  mere  attempt  to  restrain.  Section 
two  makes  the  attempt  to  monopolize  a  crime,  but  section 
one  does  not.  It  is  only  the  actual  restraint  it  aims  at,  at 
least  where  private  traders  only  are  involved. 

The  language  is  ain  restraint  of  trade  or  commerce." 
It  is  not  "to  restrain"  but  "in  restraint."  That  is,  the 
contractor,  combination  or  conspiracy  actually  does  restrain. 
As  stated,  this  is  emphasized  by  the  second  section  which 
makes  the  mere  "attempt"  to  monopolize  a  crime.  Now  a 
contract  may  itself  restrain  trade,  as  where  A  and  B  agree 
that  A  will  not  refine  oil.  But  an  agreement  between  A  and 
B  that  C  shall  not  refine  oil  does  not  restrain  C.  A  and  B> 
rivals  of  C,  all  being  refiners,  may  contract  for  the  legiti- 
mate enlargement  of  their  own  trade  to  compete  with  C  by 
cutting  prices,  etc.  All  lawful  means  to  compete  with  C 
they  may  use,  but  they  may  not  use  unlawful  means. 


Section  one  is  inoperative  unless  there  is  actual  restraint. 

Congress  has  the  regulation  of  the  intangible  thing  called 
commerce,  and  that  gives  it  the  regulation  of  the  means  by 


—221— 

which  commerce  is  carried  on.  The  transporter  from  one 
state  to  another  does  not  gain  title  to  the  object  transported 
by  or  through  any  federal  law.  That  title  is  given  to  him 
by  the  state,  not  by  the  Federal  Government.  It  is  only 
when  the  article  itself  is  in  actual  transmission  from  one 
state  to  another  that  it  is  subjected  to  the  jurisdiction  and 
control  of  Congress.  Under  the  Sherman  Act,  then,  Congress 
can  only  forbid  the  acts  which  restrain  the  article  dealt  in 
in  its  transit  from  state  to  state,  and  in  the  negotiations  and 
bargains  which  lead  up  to  its  transit.  Just  as  soon  as  the 
restraint  is  removed  the  object  of  the  act  is  accomplished,  and 
trade  is  left  unrestrained.  It  is  the  restraint  only  and  not 
the  object  itself  dealt  in  that  section  one  of  the  act  prohibits. 

Remove  restraint  and  trade  is  free.  The  very  purpose 
of  the  act  is  to  protect  trade  and  make  it  free ;  not  to  forbid 
the  trade  itself. 

Section  6  forfeiting  property  used  as  a  part  of  and  in 
connection  with  the  success  of  the  combination  is  a  mere  pen- 
alty just  as  the  imprisonment  and  fine  is.  It  seems  to  have 
no  other  significance  and  certainly  does  not  enlarge  the  jur- 
isdiction of  the  court. 

It  certainly  does  not  prove  an  intent  of  Congress  to 
inquire  into  or  regulate  the  ownership  of  the  property  which 
enters  into  interstate  trade. 


Distinction  Between  First  and  Second  Sections  of 
Sherman  Act. 

Section  three,  which  extends  the  prohibition  of  the  act  to 
the  territories,  copies  the  language  of  section  one  verbatim, 
But  not  that  of  section  two,  as  if  section  one  contained  the  sub- 
stance and  was  the  primary  definition  of  the  offense,  and  sec- 


—222— 

tion  two  was  only  another  description  of  the  same  evil,  em- 
phasizing the  monopoly  feature,  resulting  from  -successful 
combination. 


In  addition,  a  monopoly  or  an  attempt  to  monopolize 
by  a  single  person  or  corporation,  is  forbidden  by  section  two, 
whereas  a  combination  or  contract  in  restraint  of  trade  re- 
quires at  least  two  parties.  This  difference  was  pointed  out 
by  Mr.  Justice  Holmes  in  his  dissenting  opinion  in  the 
Northern  Securities  case  (193  U.  S.,  at  page  404),  in  which 
he  compared  the  first  and  second  sections  as  follows: 

"All  that  is  added  to  the  first  section  by  section  2 
is  that  like  penalties  are  imposed  upon  every  single  per- 
son who,  without  combination,  monopolizes  or  attempts 
to  monopolize  commerce  among  the  states,  and  that  the 
liability  is  extended  to  attempting  to  monopolize  any 
part  of  such  trade  or  commerce.  It  is  more  important  as 
an  aid  to  the  construction  of  section  1  than  it  is  on  its 
own  account.  It  shows  that  whatever  is  criminal  when 
done  by  way  of  combination  is  equally  criminal  if  done 
by  a  single  man." 

United  States  vs.  Patterson,  55  Federal,  605,  640,  Judge 
Putnam. 

In  Whitwell  vs.  Continental  Tobacco  Co.,  125  Federal 
454,  462,  Judge  Sanborn  said : 

"The  purpose  of  the  second  section  is  the  same  as 
that  of  the  first — to  prevent  the  restriction  of  competi- 
tion— and  the  two  sections  ought  to  receive  similar  in- 
terpretations. The  Supreme  Court  has  declared  that 
the  true  construction  of  the  first  section  is  that  no  con- 
tract, combination  or  conspiracy  is  denounced  by  it  un- 
less its  necessary  effect  is  to  directly  and  substantially 


—223— 

restrict  competition  in  commerce  among  the  states.  By 
a  parity  of  reasoning  the  correct  interpretation  of  the 
second  section  must  be  that  no  attempt  to  monopolize  a 
part  of  commerce  among  the  states  is  made  illegal  or 
punishable  by  the  provisions  of  that  section  unless  the 
necessary  effect  of  that  attempt  is  to  directly  and  sub* 
stantially  restrict  commerce  among  the  states." 


United  States  vs.  American  Tobacco  Co.,  164  Federal, 
700,  727,  Judge  Ward: 

"Tine  first  and  second  sections  must  "be  read  to- 
gether, and  I  think  mean  the  same  thing,  the  second 
adding  nothing  except  to  extend  the  prohobition  to  indi- 
viduals who,  without  combination,  monopolize  or  at- 
tempt to  monopolize.  It  must  be  understood  to  prohibit 
monopolies  or  attempts  to  monopolize  brought  about  by 
the  unlawful  means  contemplated  in  the  first  section, 
viz.,  the  purpose  to  restrain  trade  by  preventing  com- 
petition and  preventing  others  from  participating  in 
it.  The  third  section  of  the  act  bears  out  this  construc- 
tion, because  it  does  not  mention  monopolies  or  attempts 
to  monopolize  in  the  territories  or  District  of  Columbia, 
where  the  jurisdiction  of  the  United  States  is  supreme 
in  all  things,  and  it  can  hardly  be  that  Congress  intended 
to  declare  innocent  acts  committed  within  them  which  it 
pronounces  crimes  if  committed  in  the  states." 


Monarch  Tobacco  Works  vs.  American  Tobacco  Co.,  165 
Fed.,  774,  776,  777: 

"It  is  obvious  that  the  two  sections  referred  to 
make  illegal  two  different,  though  nearly  allied,  things, 
namely,  section  1  refers  to  combinations  in  restraint 


—224— 

of  interstate  trade  and  commerce,  and  section  2  refers 
to  combinations  or  conspiracies  to  monopolize,  or  to  at- 
tempt to  monopolize,  interstate  trade  and  commerce." 


Section  Two  of  the  Sherman  Act. 

The  second  section  of  the  Sherman  Act  is  primarily  di- 
rected to  the  individual,  while  the  first  is  primarily  directed 
to  combinations,  contracts  and  conspiracies.  To  show  a  viola- 
tion of  section  2  the  Government  must  prove  an  attempt  to 
gain  the  exclusive  control  of  some  part  of  interstate  trade, 
either  say  of  one  or  more  of  the  objects  of  trade  or  the  modes 
of  transportation  of  the  objects  or  the  bargain  and  sale 
of  such  objects,  and  an  attempt  to  do  this  by  unlawful  means. 
While  the  actual  ownership  of  a  control  need  not  be  shown, 
yet  the  proof  must  show:  (Mr.  Justice  Holmes,  Beef  Trust, 
196  U.  S.,  375,  396) : 

(a)  An  intent; 

(b)  A  tendency; 

(c)  An  imminent   probability   of   the   creation   of   a 
monopoly. 

So  long  as  the  attempt  is  made  by  lawful  means  which 
leaves  open  competition  there  is  no  violation  of  section  two, 
even  if  the  attempt  to  gain  control  of  a  large  portion  of  the 
interstate  traffic  is  successful. 

As  section  one  is  directed  against  the  contracts  which, 
being  executed,  restrain  trade,  and  is  not  primarily  directed 
against  the  individual  (and  indeed  the  individual  alone  could 
not  violate  it),  section  two  is  primarily  directed  against  the 
individual.  It  begins : 

"Every  person  who  shall  monopolize  or  attempt  to 
monopolize  or  combine  or  conspire  with  any  other  per- 
son or  persons  to  monopolize." 


—225— 

It  is  the  person,  then,  who  may  monopolize;  any  one 
individual  might,  this  section  contemplates,  monopolize  the 
interstate  trade,  or  at  least  if  he  did  not  monopolize  he  could 
attempt  to,  and  the  individual  who  does  so  is  deemed  guilty 
of  a  misdemeanor.  It  is  the  individual  who  is  punished 
and  not  the  combine  or  conspirators,  because  this  section  of 
the  act  says : 

"Every  person  who  shall  monopolize  or  attempt  to 
monopolize  or  combine  or  conspire  with  any  other  per- 
son or  persons  to  monopolize  *  *  *  shall  be 
deemed  guilty  of  a  misdemeanor." 

The  person  may  act  singly  or  he  may  combine  or  he 
may  conspire  with  others,  but  it  is  the  individual  who  does 
these  things  that  the  act  is  directed  primarily  against,  and 
it  is  not  the  combine  or  conspiracy.  It  is  probably  true  that 
each  one  of  the  combine  that  attempts  to  monopolize  is  equally 
guilty  with  him  who  originated  the  combination,  and  this  is 
equally  true  of  the  conspiracy,  and  it  is  not  doubted  that  each 
and  all  of  the  persons  who  joined  the  combine  or  conspiracy 
for  the  purpose  of  and  in  an  attempt  to  monopolize  the  in- 
terstate trade  are  deemed  to  be  guilty  of  a  misdemeanor. 


The  powers  by  the  private  trader  to  control  the  trade 

—fix  its  prices,  etc. — if  lawfully  won,  as  by  internal  growth 

and  development,  and  the  result  of  legitimate  competition — 

is  NOT  denounced  by  the  Sherman  Act,  but  is  permitted,  and 

indeed  encouraged. 

Thus  in  Whitwell  vs.  Tobacco  Company,  125  Fed. 
Rep.,  454,  the  Circuit  Court  of  Appeals,  Judge  Sanborn  de- 
livering the  unanimous  opinion  of  the  Court,  said :  (462) 

"It  is  admitted  that  the  practice  of  the  defendants 
was  not  only  of  an  attempt,  but  a  successful  at- 
tempt to  monopolize  a  part  of  this  commerce.  *  *  * 


—226— 

(463)  But  an  attempt  to  monopolize  a  part  of  interstate 
commerce,  which  promotes,  or  but  indirectly  or  inciden- 
tally restricts  competition  therein,  while  its  main  purpose 
and  chief  effect  are  to  increase  the  trade  and  foster  the 
business  of  those  who  make  it,  was  not  intended  to  be 
made  and  was  not  made  illegal  by  the  second  section  of 
the  act  under  consideration,  because  such  attempts  are 
indispensable  to  the  existence  of  any  competition  in  com- 
merce among  the  states." 

This  must  follow : 

(1)  Each  individual  citizen  may  of  right  enter 
into  interstate  commerce: 

(2)  Free  competition  for  that  trade  or  commerce 
is  not  only  allowed,  but  is  encouraged : 

(3)  But  an  essential  part  of  competition  is  the 
award  following  the  strife.     It  was  for  that  award  all 
competitors  strove.    And  that  award  was  a  monopoly  of 
the  whole  or  part  of  the  trade  which  enabled  him,  by 
the  control  thus  gained,  to  fix  prices, — exclude  of  neces- 
sity some  others  from  the  trade. 

And  the  law  not  only  allows,  but  gives  the  winner 
that  monopoly. 


THE  PURPOSE  OF  THE  SHERMAN  ACT  IS 
TO  FURTHER  FREE  COMPETITION  IN  INTER- 
STATE TRADE. 

The  only  qualification  is  free  competition,  not  reason- 
able competition  or  fair  competition,  but  simply  and  only 
free  competition;  that  is,  all  the  means  of  competition  that 
are  lawful. 

The  authorities  supporting  this  are  unanimous  and  are 
collected  in  the  appendix  (p.  3). 


—227— 


V. 


THE  GOVERNMENT  TO  PROVE  ITS  CASE 
MUST  SHOW  VIOLATIONS  OF  THE  FEDERAL 
LAW.  THERE  WAS  NO  FEDERAL  LAW  APPLI- 
CABLE PRIOR  TO  THE  SHERMAN  ACT. 


The  inquiry  here  is  solely  this:  Was  the  Sherman  Act 
being  violated  by  the  defendants  when  the  petition  in  this 
case  was  filed  ? 


This  is  a  question  of  federal  law  and  between  the  United 
States  and  citizens  of  the  United  States.  It  is  not  a  contro- 
versy between  a  State  and  its  citizens,  and  the  Government 
cannot  make  out  its  case  by  appealing  to  State  laws  or  show- 
ing any  violation  thereof.  The  individuals  are: 

1.  Citizens  of  the  United  States ; 

2.  Citizens  of  the  State. 

Each  sovereign  has  its  own  distinct,  exclusive  field  of 
jurisdiction.  The  state  cannot  provide  for  the  federal  rights 
of  a  citizen  of  the  United  States  or  punish  the  violation  there- 
of, and  equally  the  United  States  cannot  protect  the  State 
rights  of  the  citizens  or  punish  the  violation  thereof. 
United  States  vs.  Reese,  92  U.  S.,  214; 

See  Mr.  Justice  Holmes  to  same  effect 

Northern  Securities  Case,  193,  U.  S.,  409. 


—228— 

United  States  vs.  Harris,  106  U.  S.,  629 ; 
United  States  vs.  Cruikshank,  92  U.  S.,  542 ; 
United  States  vs.  Fox,  94  U.  S.,  315 ; 
Logan  vs.  U.  8.f  144  U.  S.,  263. 

The  rights  and  duties  of  the  defendants  and  the  lawful- 
ness or  otherwise  of  their  conduct,  as  alleged  in  the  petition, 
are  to  be  tested  by  federal  laws  only,  and  if  the  things  al- 
leged in  the  petition  as  done  by  the  defendants  prior  to  1890 
were  not  forbidden  by  those  federal  laws,  the  same  must  be 
regarded  up  to  1890  as  innocuous.  Whatever  doubts  there 
may  be  under  the  decisions  (cases  cited  infra)  as  to  the 
existence  or  not  of  any  so-called  federal  common  law,  it 
seems  certain  that  such  federal  common  law  could  only  in- 
volve acts  which  came  under  federal  control  by  reason  of  the 
grants  in  the  Federal  Constitution  to  the  United  States  Gov- 
ernment. Article  10  of  the  Federal  Constitution  reserved  it 
to  the  States.  For  the  federal  court  to  create  by  decision  a 
Federal  common  law  outside  of  and  foreign  to  the  powers 
granted  to  the  Federal  Government  would  necessarily  invade- 
the  rights  of  the  States  and  exceed  the  granted  jurisdiction. 


The  federal  courts  have  just  the  judicial  power  given- 
and  authorized  by  Article  3  of  the  Constitution,  and  such 
is  limited  to  the  scope  of  the  powers  granted  in  the  Consti- 
tution to  the  Federal  Government,  except  in  certain  specific 
instances  like  litigation  between  citizens  of  different 
States,  etc. 


For  the  judicial  power  to  assume  and  use  the  power  to 
legislate  and  create  and  enforce  a  federal  common  law  on 
subjects  foreign  to  the  powers  granted  to  the  Federal  Gov- 
ernment would  be  wholly  unjustified. 


—229— 

Especially  is  this  the  case  in  the  regulation  of  interstate 
commerce.  The  power  is  to  regulate,  and  it  is  given,  not  to 
the  Courts,  but  to  Congress.  What  those  regulations  shall 
be  is  a  legislative  question  only.  It  is  not  judicial.  The 
Courts  are  powerless  to  establish  regulations.  True  the  fed- 
eral courts  have  held  that  in  the  absence  of  regulations  by 
Congress  it  was  a  Congressional  declaration  that  interstate 
commerce  should  be  free,  and  therefore  the  acts  by  States  or 
individuals  which  directly,  immediately  and  substantially 
do  regulate  or  interfere  with  interstate  commerce  are  unau- 
thorized excursions  into  the  field  of  Congressional  powers. 
But  the  Court  always  have  and  do  still  say  that  there  is 
no  Federal  crime  except  by  act  of  Congress. 


We  ask  attention  to  a  discussion  in  our  appendix 
(p.  10)  with  authorities  cited,  as  to  the  existence  of  a 
federal  common  law  as  to  what  is  or  is  not  forbidden  in 
inter-state  commerce.  In  cases  between  private  parties  in- 
volving property  rights  the  federal  courts  use  the  common 
law  of  the  state  in  which  the  controversy  arose — as  in  the 
Western  Union  Telegraph  case,,  (181  U.  S.).  When  it  is 
a  question  between  states,  as  in  Kansas  vs.  Colorado,  (206 
U.  S.)  the  court  applies  international  law. 

But  the  present  case  does  not,  as  between  the  Govern- 
ment and  the  individual  defendant,  involve  primarily  a 
question  similar  to  either  of  the  other  cases. 

Mr.  Justice  Holmes  said  in  Beasley  vs.  Texas  &  Pacific 
Railway  Company,  191  TJ.  S.,  498, 

"The  very  meaning   of   public   policy   is   the   in- 
terests of  others  than  the  par  ties. " 

The  Common  Law  in  a  case  like  this  is  a  rule  of  pub- 


—230— 

lie  policy.  It  is  made  up  of  ancient  statutes,  traditions 
of  the  law  from  approved  text  books,  and  especially  de- 
cisions of  the  courts.  But  in  the  end,  as  to  what  offends 
as  a  trade  regulation,  as  to  what  is  a  monopoly,  or  what 
is  restraint  of  trade,  all  depends  on  each  state, —  the  ideas 
appropriately  expressed  for  all  the  people  of  that  state. 

But  for  the  court  to  endeavor  to  declare  a  federal  pub- 
lic policy  which  would  regulate  inter-state  commerce  is  ta 
usurp  the  functions  of  Congress,  to  whom  the  people  of 
the  United  States  gave  that  express  authority. 

It  is  submitted  that : 

(a)  The  petition  filed  in  this  case  relies  solely  and 
only  on  the  Sherman  Act  and  not  on  the  existence  of  any 
federal  common  law  prior  to  its  passage. 

(b)  The  petition  charges  a  crime  and  a  crime  against 
the  United  States.    There  is  no  such  thing  as  a  crime  against 
the  United  States  unless  it  be  so  declared  by  Act  of  Con- 
gress.    The  Government  must  make  out  its  case  proving  the 
crime  under  federal  law  only.     There  was  no  federal  law 
making,  say  the  Agreement  of  1882  or  1879,  a  crime  against 
the  United  States  Government. 

The  ruling  in  the  Western  Union  Telegraph  Case,  which 
was  a  controversy  between  citizens  of  different  States  and 
involved  only  their  relative  rights,  is  not  important  here. 
That  case  originated  in  the  State  Court  and  the  State  Court 
administered  the  State  law  and  this  Court  approved  the  same. 

(c)  The  Congress  and  the  Federal  Courts  do  not  con- 
trol or  have  jurisdiction  over  the  acquisition  of  properties. 
That  is  left  wholly  to  the  States.    Even  if  (which  we  deny) 
it  were  true,  it  is  not  a  violation  of  any  law  of  Congress,  and; 
especially  not  of  the  Sherman  Act. 


—231— 

(d)  The  only  thing  which  these  defendants  put  into 
interstate  trade  and  for  which  they  compete  is  the  trade  in  oil 
and  its  products.  The  refineries  are  not  in  interstate  trade. 
It  is  the  oil  only  and  its  products.  The  oil  itself  was  not 
illegally  acquired,  and  the  Government  does  not  so  allege. 
How  is  it  possible  to  inflict  the  vice,  if  any  there  be,  of  the 
acquisition  of  the  title  of  the  real  estate  to  the  refined  oil  and 
its  products  ? 

See  also   Newport   &    Cincinnati  Bridge    Co.    vs. 

United  States,  105  U.  S.,  470,  475. 
Pennsylvania  vs.  Wheeling  &  Belmont  Bridge  Go., 

13  How.,  518,  581;  McLean,  J. 
Transportation  Co.    vs.   Parkersburg,    107   U.    S., 

691,  701. 

There  is  no  federal  crime  except  such  as  is  so  made 
by  Act  of  Congress,  and  until  the  Sherman  Act  the  mat- 
ters and  things  charged  in  the  Petition  were  not  federal 
crimes. 


To  what  extent  there  is  a  federal  common  law  may 
be  now  uncertain,  but  if  such  there  be,  it  must  be  re- 
stricted to  those  things  which  by  the  Constitution  are 
vested  in  the  federal  Government — and  cannot  extend  to 
such  things  as  the  ownership  of  properties  in  a  state,  a 
regulation  of  such  ownership,  or  the  production  or  man- 
ufacture within  a  State  of  crude  or  refined  oil. 


Courts  have  always  and  still  do  say  that  there  is  no  Fed- 
eral crime  unless  so  declared  by  Act  of  Congress. 
Manchester  vs.  U.  S.,  139  U.  S.,  262 ; 
North  Shore  Co.  vs.  Nicomen  Co.,  212  U.  S.,  412. 


—232— 

The  Supreme  Court  ruled  in  Wheaton    vs.    Peters,    8 
Peters,  591,  658)  : 

"It  is  clear  there  can  be  no  common  law  of  the 
United  States." 


The  Federal  Courts  have  no  jurisdiction  except  that 
which  is  conferred  by  the  Constitution  or  Acts  of  Congress, 
and  cannot  recognize  any  crime  against  the  United  States  ex- 
cept that  which  has  been  so  declared  by  Acts  of  Congress. 

Cooley's  Const.  Lim.  pp.  47-48,  and  notes; 

U.  S.  vs.  Hudson,  7  Cranch,  32 ; 

U.  S.  vs.  Coolidge,  1  Wheaton,  415; 

U.  8.  vs.  Britton,  108  U.  S.,  199-206. 

Wheaton  &  Donaldson  vs.  Peters  &  Grigg,  8  Peters,  591, 
658.  Mr.  Justice  McLean  said: 

"It  is  clear  there  can  be  no  common  law  of  the 
United  States.  The  Federal  Government  is  composed 
of  twenty-four  sovereign  and  independent  states,  each 
of  which  may  have  its  local  usages,  customs  and  com- 
mon law.  There  is  no  principle  which  pervades  the 
Union,  and  has  the  authority  of  law  that  is  not  embodied 
in  the  Constitution  or  laws  of  the  Union.  The  com- 
mon law  could  be  made  a  part  of  our  Federal  system 
only  by  legislative  adoption.  When,  therefore,  a  com- 
mon law  right  is  asserted  we  must  look  to  the  State  in 
which  the  controversy  originated." 

Holmes  vs.  Jennison,  34    Pet.,    540,    620;  Bald- 
win, J. 

This  case  is  cited  and  approved  in  1909  in  the  case  of 
North  Shore  Boom  Co.  vs.  Nicomen  Boom  Co.,  212  U.  S. 
412. 

(See  additional  authorities  in  appendix,  page  15). 


—233-* 


EVEN  IF  REFINERIES  HAD  BEEN  AC- 
QUIRED BY  MEANS  UNLAWFUL  PRIOR  TO 
THE  SHERMAN  ACT  (WHICH  WE  DENY),  YET 
THIS  CANNOT  INFLUENCE  THE  DECISION  IN 
THIS  CASE. 

The  Government  alleges  that  between  1870  and  1882, 
the  defendants,  by  improper  means,  acquired  certain  re- 
fineries. 

The  answers  are  several: 

(a)  This  is  denied  by  the  Answer  and  is  neither  sup- 
ported by  the  evidence  nor  found  by  the  Court. 


(b)  It  is  a  matter  which  does  not  concern  the  Govern- 
ment. Our  title  by  which  we  hold  our  joint  properties  is 
not  involved  in  this  controversy.  If  by  any  improper  methods 
we  took  undue  advantage  of  any  one  by  which  we  gained  this 
property  that  is  a  question  between  such  person  and  our- 
selves and  not  between  the  Government  and  ourselves. 


After  an  illegal  contract  for  the  acquisition  of  prop- 
erty has  become  executed,  subsequent  dealings  with  the 
property  will  be  judged  on  their  own  merits. 

Dent  vs.  Ferguson,  132  U.  S.,  50,  66. 

Brooks  vs.  Martin,  2  Wall.,  70,  80. 
Plaintiffs  and  defendant  formed  a  partnership  to  buy 
up  soldiers'  claims  for  public  lands.    After  they  had  obtained 


lands  in  this  manner  and  sold  them,  taking  notes  and  mort- 
gages in  payment  of  same,  plaintiff  filed  a  bill  in  equity  to 
compel  the  defendant  to  account  for  the  proceeds.  The  bill 
was  sustained,  Mr.  Justice  Miller  saying: 

"*  *  *  The  title  to  the  lands  is  not  rendered 
void  by  the  statute.  It  interposes  no  obstacle  to  the  col- 
lection of  the  notes  and  mortgages.  The  transactions 
which  were  illegal  have  become  accomplished  facts,  and 
cannot  be  affected  by  any  action  of  the  court  in  this 
case." 


In  Armstrong  vs.  Toler,  11  Wheat.,  258,  a  case  is  put 
of  goods  smuggled  into  the  country ;  here  even  if  the  vendor 
knows  them  to  be  smuggled  he  may  buy  them. 

(270)  "The  consideration  is  not  infected  with  the 
vice  of  the  importation.  *  *  *  This  would  be  to 
connect  distinct  and  independent  transactions  with  each 
other,  and  to  infuse  into  one  which  was  perfectly  fair  and 
legal  in  itself,  the  contaminating  matter  which  infected 
the  other.  This  would  introduce  extensive  mischief  into 
the  ordinary  affairs  and  transactions  of  life  not  com- 
pensated by  any  one  accompanying  advantage. 

States  vs.    Continental    Tobacco    Co.,    177    Mis- 
souri, 34. 


In  Planters  Bank  vs.  Union  Bank,  16  Wall.,  483,  499, 
Mr.  Justice  Strong  said: 

"Nor  should  the  court  have  charged  that,  in  the 
circumstances  of  this  case,  no  action  would  lie  for  the 
proceeds  of  the  sales  of  Confederate  bonds  which  had 


—235— 

been  sent  by  the  plaintiffs  to  the  defendants  for  sale, 
and  which  had  been  sold  by  them,  though  the  proceeds 
had  been  carried  to  the  credit  of  the  plaintiffs  and  made 
a  part  of  the  accounts.  It  may  be  that  no  action  would 
lie  against  a  purchaser  of  the  bonds,  or  against  the  de- 
fendants or  any  engagement  made  by  them  to  sell  Such 
a  contract  would  have  been  illegal.  But  when  the  illegal 
transaction  has  been  consummated;  when  no  court  has 
been  called  upon  to  give  aid  to  it;  when  the  proceeds 
of  the  sale  have  been  actually  received,  and  received  in 
that  which  the  law  recognizes  as  having  had  value;  and 
when  they  have  been  carried  to  the  credit  of  the  plain- 
tiffs, the  case  is  different.  The  court  is  there  not  asked 
to  enforce  an  illegal  contract.  The  plaintiffs  do  not  re- 
quire the  aid  of  any  illegal  transaction  to  establish  their 
case.  It  is  enough  that  the  defendants  have  in  hand  a 
thing  of  value  tJiat  belongs  to  them.  Some  of  the  au- 
thorities show  that,  though  an  illegal  contract  will  not 
be  executed,  yet,  when  it  has  been  executed  by  the 
parties  themselves,  and  the  illegal  object  of  it  has  been 
accomplished,  the  money  or  thing  which  was  the  price 
of  it  may  be  a  legal  consideration  between  the  parties  for 
a  promise,  express  or  implied,  and  the  court  will  not  un- 
ravel the  transaction  to  discover  its  origin." 


Railroad    Company    vs.    Durant,     95     U.     S.,     576, 
Swayne,  J. : 

"But  it  is  said  the  conveyances  grew  out  of  an  il- 
legal transaction  between  the  company  and  the  grantors. 
To  this  there  are  several  answers.  The  grantors  have 
voluntarily  executed  the  contract.  They  have  not  inter- 
vened and  do  not  complain." 


—236— 

THE  TRUST  AGREEMENT  OF  1882. 
Position  of  the  Government. 

As  stated  by  the  senior  counsel  for  the  Government, 
its  case  in  the  Court  below  is  as  follows : 


FIRST.  The  Trust  Agreement  of  1879  (Vilas,  Keith 
&  Chester)  and  the  Trust  Agreement  of  1882 — but  especially 
the  Trust  Agreement  of  1882 — are  both  void  at  common  law 
as  being, 

(a)  In  restraint  of  competition  in  trade  and  as 
tending  to  a  monopoly; 

(b)  Against  the  policy  of  the  State  of  Ohio ;  and 

(c)  Against  the  Federal  common  law : 


SECOND.  This  Trust  Agreement  of  1882  under  the 
control  of  the  seven  individual  defendants,  was  practically 
continued  until  1899  because  the  dissolution  of  the  Trust 
in  1892  was  by  such  method  as  to  enable  the  seven  individ- 
uals still  to  control  properties: 

THIRD.  When  these  properties  in  1899  were  conveyed 
to  the  Standard  Oil  Company  of  New  Jersey,  this  also  was  a 
continuation  of  the  Trust,  and  in  itself  was,  in  addition,  the 
creation  of  a  combination  in  restraint  of  trade  and  tending 
to  a  monopoly: 


FOURTH.     That  under  the  corporate  existence,  this  still 
continues. 


—237— 

In  this  mode  of  reasoning,  it  is  apparent  that  the  whole 
argument  rests  on  two  propositions : 

(1)  Were   the   Trust  Agreements   of   1879    and 
1882  void  at  common  law  and  under  the  federal  com- 
mon law? 

(2)  Was  the    conveyance    to    the    Standard    Oil 
Company  of  New  Jersey  in  1899  a  restraint  of  trade 
and  a  monopoly  in  violation  of  the  Sherman  Act  ? 


TRUST  AGREEMENT  OF  1882. 

We  propose  to  consider : 

(1)  Was  the  trust  agreement  of  1882  illegal  at  com- 
mon law? 

(2)  Assuming  it  to  be  so  illegal,  was  it  prior  to  the 
Sherman  Act  illegal  under  federal  law,  statutory  or 
common  ? 

(3)  Assuming  it  was  so  illegal,  did  the  fact  of  the  con- 
veyance of  the  same  properties  in  the  trust  in  1899 
to  the  Standard  Oil  Company  per  se  and  of  itself, 
and  without  further  action,  make  such  Standard 
Oil  Company  ownership  after  the  conveyance,  a 
direct,  substantial,  immediate  restriction  of  inter- 
state trade  and  directly,  immediately  and  substan- 
tially tending  to  monopoly  ? 

Was  the  trust  illegal  at  common  law? 

The  test  of  whether  a  trust  formed  by  individuals  is 
lawful  is — is  it  formed  for  a  lawful  purpose  ?  Any  par- 
ticular trust  may  also  involve  the  question  of  corporate 
power,  i.  e.,  the  corporations  joining  may  not  have  the  power 
so  to  do — and  as  the  act  is  ultra  vires  it  may  be  a  ground  of 
forfeiture  by  the  state  of  the  particular  charter  in  question. 


—238— 

On  this  ground   also  the   Sugar  Trust — the   Standard   Oil 
Company  of  Ohio,  and  other  cases  were  founded. 

But  it  is  evident  such  reason  affords  no  assistance  in 
answering  the  question.  Aside  from  this  corporate  question, 
is  such  a  trust  void  at  common  law  ? 

In  each  one  of  the  cases  cited,  the  thing  which  made  the 
Trust  obnoxious  to  the  law  was  that  the  court  said  in  each 
case  the  purpose  and  direct  and  necessary  effect  of  it  was 
to  eliminate  competition  and  form  a  monopoly.  ~No  one  of 
those  cases  held  that  a  Trust  per  se  and  of  itself,  formed  for 
a  lawful  purpose,  was  forbidden  at  common  law,  and  much 
less  is  it  by  the  Sherman  Act. 

In  every  one  of  these  cases  cited  the  question  was  one 
of  corporate  power,  i.  e.,  whether  the  thing  done  was  not  be- 
yond the  power  of  the  corporation  ultra  vires  and  therefore 
a  ground  for  forfeiture  of  the  particular  charter,  and  in  each 
case  it  was  held  to  be  so. 

(See  our  discussion  of  such  cases  in  our  appendix,  p.  20). 

The  Sherman  Act  does  not  pretend  to,  indeed  could 
not,  regulate  the  methods  by  which  citizens  should  hold  their 
titles.  This  is  undoubtedly  a  question  belonging  to  the 
states. 


!N"ow  the  facts  in  our  case  as  in  part  found  by  the  court 
below,  were  very  briefly  these: 

(1)  The  petition  charges  and  the  question  on  trial 
here  is,  whether  the  acts  of  seven  individuals,  beginning  in 
1870  and  continued  until  1906  do  or  do  not  constitute  a  con- 
spiracy to  restrict  and  monopolize  trade  in  oil. 


—239— 

(2)  In  the  period  from  1870  to  1882,  the  property 
these  seven  accumulated  was  first  held  as  partnership  prop- 
erty, and  then-  by  Ohio  Standard  Oil  Company  and  then  in 
part  by  Vilas,  Keith  and  Chester  in  1879,  and  then  in  1882 
By  the  nine  (9)  trustees  under  that  agreement.     The  acquisi- 
tions were  all  made  prior  to  1879,  the  court  below  finding: 

"It  is  true  with  negligible  exceptions  that  the  stock- 
holders of  the  defendant  corporations  were  the  joint, 
equitable  owners  of  them  from  1879  or  from  their  sub- 
sequent organizations  respectively  until  July  1,  1899, 
but  the  great  majority  of  these  stockholders  never  held 
the  legal  title  to  their  stock  except  during  a  few  months 
between  1896  and  1900." 

(Opinion,  Record  A,  p.  580). 

(3)  A  portion  of  these  properties  so  acquired  had  been 
purchased  from  others  prior  to  1882,  and  some  of  them  sup- 
posedly had  been  engaged  in  competition  with  some  of  the 
properties  the  seven  and  their  associates  owned.     But  it  is 
confidently  asserted  that  the  evidence  is  barren  of  proof  to 
show  that  a  single  one  of  these  properties  so  purchased  was 
acquired  by  fraudulent,  illegal  or  undue  means.     Of  those 
who  did  sell  to  the  seven  and  their  associates,  no  one  was 
called  by  the  Government  to  so  assert. 

(4)  The  persons  who  in  1879  and  1882  owned  these 
properties  were  the  seven  and  their  associates.     They  were 
then  the  undoubted,  lawful  equitable  owners  of  them,  but 
the  legal  title  was  held  at  different  times  in  different  ways. 
At  one  time  by  the  partnership ;  at  another  time  by  the  cor- 
poration, the  Standard  Oil  Co.  of  Ohio;  then  by  that  com- 
pany, and  then  by  Vilas,  Keith  and  Chester,  trustees;  and 
then  by  the  nine  trustees.    The  reasons  why  the  changes  were 
made  were : 

(a)  The  doubt  as  to  the  power  of  the  Standard 
Oil  Company  of  Ohio  to  hold  properties  outside  of  Ohio. 


—240— 

(b)  The  convenience,  for  purposes  of  manage- 
ment and  control,  of  holding  all  the  properties  under  one 
and  the  same  title. 

(5)  The  equitable  owners  who  in  1882  conveyed  to 
the  nine  trustees  thereby  acquired  no  other  power  or  right 
than   they  had  before   the   conveyance.     They   acquired   no 
additional  properties  to  those  they  already  had,  nor  interest 
in  other  properties.      They  always    of    necessity    had    the 
legal  title  to  their  properties  held  by  some  one  for  them,  and 
they  always  had  to  have  agents  and  employes  to  attend  to 
them;  and  the  agreement  of  1882  accomplished  no  other  pur- 
pose, had  no  other  purpose  than  to  enable  their  owners  the 
more  conveniently  to  hold  and  manage  their  properties.     The 
owners  did  not  do  this  to  smother  competition  or  gain  a  mo- 
nopoly.    They  had  before  they  conveyed  all  they  had  after 
they  conveyed — the  same  power, — the  same  properties. 

(6)  The  method  of  holding  properties  is  one  largely 
acquired  under  the  common  law  and  from  England.     Under 
the  law,   tenancy   in   common — joint   tenacy — co-partners — 
titles  by  fee  simple — or  a  base  or  limited  fee;  for  life  or  for 
years.     All  kinds  of  limitations  as  vested  and  contingent  re- 
mainders— executory  devices. 

In  equity, — equitable  titles — where  one  held  the  legal 
title  for  the  use  of  another.  There  are  similar  estates  and 
other  estates,  such  as  springing  and  shifting  uses. 

The  lawfulness  of  so  holding  properties  is  unquestion- 
able. Before  the  trust  becomes  illegal,  it  must  be  shown  it 
was  made  for  the  purpose  of  smothering  competition,  and 
forming  by  illegal  means  a  monopoly. 

(7)  There  is  nothing  on  the  face  of  the  trust  of  1882 
which  condemns  it :  nothing  to  show  it  was  intended  to  or  did 


—241— 

smother  competiiton ;  nothing  tending  to  show  a  purpose  of 
gaining  a  monopoly.  The  properties  conveyed  to  it  were, 
when  conveyed,  non-competitive.  They  were  owned  by  the 
same  people  as  private  traders  and  used  in  such  trade,  and 
they  were  not  by  law  compelled  to  compete  with  each  other. 
They  were  held  and  used  after  the  trust  just  as  before.  They 
were  so  owned  by  the  same  persons  in  the  same  proportions. 
The  trustees  gained  no  power  which  the  joint  owners  did  not 
before  have.  Before  the  conveyance  all  the  properties  were 
used  as  one  joint  property  in  trade;  after,  just  the  same. 


THE  RIGHT  OF  INDIVIDUALS  TO  UNITE 
AND  HOLD  WHAT  THE  COURT  BELOW  CALLS 
POTENTIALLY  COMPETING  PROPERTIES  OR 
BUSINESS  WAS  UNQUESTIONED  AT  COMMON 
LAW. 

In  Mogul  Steamship  Company  vs.  McGregor,  23  Q.  B., 
598,  618,  Lord  Justice  Bowen  said  that: 

"It  is  perfectly  legitimate,  as  it  seems  to  me,  to 
combine  capital  for  all  the  mere  purposes  of  trade  for 
which  capital  may,  apart  from  combination,  be  legiti- 
mately used  in  trade.  To  limit  combinations  of  capital, 
when  used  for  purposes  of  competition,  in  the  manner 
proposed  by  the  argument  of  the  plaintiffs,  would,  in  the 
present  day,  be  impossible — would  be  only  another 
method  of  attempting  to  set  boundaries  to  the  tides." 

Ontario  Salt  Co.  vs.  Merchants'  Salt  Co.,  18  Grant's 
Chan.,  540  (Ontario,  1871.)  : 

A  number  of  individuals  and  corporations,  engaged  in 
the  manufacture  and  sale  of  salt,  entered  into  an  agreement 
to  "combine,  amalgamate  and  unite  under  the  Canadian  Salt 


—242— 

Association/7  and  to  sell  all  salt  produced  by  them,  through 
trustees. 

The  Court  of  Chancery  held  the  agreement  lawful,  and 
enjoined  a  member  from  violating  it. 

Vice-Chancellor  Strong  said : 

"Then  there  is  no  restriction  on  the  sale  of  the  salt, 
but  it  is  all  to  be  placed  in  the  hands  of  the  trustees, 
whose  duty  it  is  to  sell  to  the  best  advantage,  the  interest 
of  all  being  alike.  What  is  this  more  than  two  persons 
carrying  on  the  same  trade  binding  themselves  not  to 
undersell  each  other  ?  And  can  it  be  said  that  such  an 
agreement  would  be  in  restraint  of  trade  ?  The  only  dis- 
tinction between  such  a  case  and  this  is,  that  in  the  case 
put  the  parties  would  be  subject  to  the  inconvenience 
of  having  constantly  to  adjust  the  prices  with  the  risk  of 
frequent  disagreements,  whilst  in  the  present  case  that 
is  obviated  by  leaving  it  to  the  judgment  of  a  common 
agent.  Suppose  two  producers  of  any  article  agree  to 
consign  all  their  produce  to  the  same  agent  and  to  leave 
that  agent  to  sell  for  same  price.  How  would  public 
policy  be  infringed  by  such  an  arrangement  ?  The  argu- 
ment on  the  part  of  the  defendants  might  be  pushed  so 
far  as  to  make  a  partnership  between  two  persons  carry- 
ing on  the  same  trade  illegal  as  tending  to  lessen  com- 
petition. I  do  not  follow  Mr.  Crooks  in  his 
argument  that  the  number  of  persons  associated  in  this 
arrangement  made  a  difference.  It  appears  on  the  face 
of  the  bill  that  they  are  not  all  the  salt  producers  in 
the  Province,  and  it  also  appears  that  salt,  other  than  the 
produce  of  the  wells  of  the  plaintiffs  and  defendants, 
can  be,  and  is  supplied  to  the  public.  This  being  so,  I 
think  it  makes  no  difference  that  this  agreement  was  en- 
tered into  by  twenty  persons  engaged  in  the  trade  in- 
stead of  only  two." 


—243— 

Collins  vs.  Locke,  L.  R,  4  App.  Gas.  674,  685.  (1879.)  : 

The  House  of  Lords  held  valid,  an  agreement  among 
four  individuals  and  firms  to  divide  the  business  of  steve- 
dores in  the  Port  Melbourne. 

The  court  said : 

"The  objects  which  this  agreement  has  in  view  are 
to  parcel  out  the  stevedoring  business  of  the  port 
amongst  the  parties  to  it,  and  so  to  prevent  competition, 
at  least  amongst  themselves,  and  also  it  may  be,  to  keep 
up  the  price  to  be  paid  for  the  work.  Their  Lordships 
are  not  prepared  to  say  that  an  agreement,  having  these 
objects,  is  invalid  if  carried  into  effect  by  proper  means, 
that  is,  by  provisions  reasonably  necessary  for  the  pur- 
pose, though  the  effect  of  them  might  be  to  create  a 
partial  restraint  upon  the  power  of  the  parties  to  exer- 
cise their  trades." 


WicJcens  vs.  Evans  3  Younge  &  Jervis,  318.  (1829)  : 

Three  individuals  engaged  in  manufacturing  and  sell- 
ing trunks  in  different  parts  of  England,  agreed  to  divide 
the  territory,  and  that  each  should  have  the  exclusive  right  to 
sell  in  the  district  allotted  to  him.  The  purpose  of  the  agree- 
ment was  to  pre\ent  the  inconvenience  and  loss  resulting 
from  competition. 

Held,  that  the  agreement  was  not  illegal  as  in  restraint 
of  trade. 

The  court  here  suggested  as  the  test  of  .illegality, 
whether  illegal  means  were  used  to  exclude  competitors. 

"An  objection  is  then  made  to  that  part  of  the 
agreement,  by  which  it  is  stipulated,  that,  in  case  other 


—244— 

persons  shall  begin  to  trade  as  box-makers  in  any  of  the 
districts,  the  parties  shall  meet  to  devise  means  to  pro- 
mote their  own  views.  What  those  means  may  be,  it  is 
unnecessary  to  surmise;  but  we  cannot  presume  that 
they  will  be  illegal ;  and,  therefore,  this  stipulation  does 
not  affect  the  validity  of  the  agreement." 


THE  JOINT  OWNERS  OF   SEVERAL   PARCELS 
OF  PROPERTY  NOT  BOUND  TO  COMPETE. 

National  Cotton  Oil  Company  vs.  Texas,  197  U.  S.,  115, 
128,  McKenna,  J. : 

"There  are  some  things  which  counsel  easily  demon- 
strate. They  easily  demonstrate  that  some  combination 
of  capital  is  necessary  to  any  business  development,  and 
that  the  result  must  inevitably  be  a  cessation  of  competi- 
tion." 

Atcheson  vs.  Motion,  43  1ST.  Y.,  147,  151: 

"Joint  adventures  are  allowed.  They  are  public 
and  avowed  and  not  secret.  The  risk  as  well  as  the 
profit,  is  joint  and  openly  assumed.  The  public  may 
obtain  at  least  the  benefit  of  the  joint  responsibility  and 
of  the  joint  ability  to  do  the  service." 


CooJce  on  Combinations  (2nd  Ed.  of  1909)  ;  Sec.  129: 

"It  scarcely  needs  pointing  out  that  the  existence 
of  the  element  of  combination  in  no  way  necessarily  in- 
volves the  existence  of  an  illegal  restriction  upon  com- 
petition. Otherwise  every  partnership,  indeed,  co- 
operation under  any  form,  would  be  illegal." 


—245— 

Fairbank  vs.  Leary,  40  Wis.,  637,  642-643 : 

"The  clause  in  the  co-partnership  agreement 
wherein  each  partner  agreed  not  to  transact  on  his  in- 
dividual account,  within  twenty  miles  of  Waupun,  the 
kind  of  business  for  the  transaction  of  which  the  co- 
partnership was  created,  is  unobjectionable/' 

«#     *     *     j^e  iaw  does  noi  and  fad  noi  require 

that  these  parties  should  compete  in  the  purchase  of 
produce.  Individually  each  had  an  undoubted  right  to 
bid  therefor  as  low  as  he  pleased.  Collectively,  they  had 
the  same  right,  unless  deception  was  practiced  on  the 
public." 


Marsh  vs.  Russell,  66  K  Y.,  288,  292 : 
In  holding  valid  a  partnership  agreement  between  cer- 
tain persons  who  had  previously  been  competitors,  the  Court 
of  Appeals,  by  Earl,  J.,  said : 

"The  business  of  furnishing  recruits  was  a  lawful 
one,  and  could  be  carried  on  by  individuals  or  firms; 
when  carried  on  by  a  firm  its  members  could  regulate 
the  price  at  which  they  would  buy  and  sell,  as  they  could 
if  they  had  been  dealers  in  other  articles  having  a  price. 
Suppose  they  had  formed  a  partnership  to  buy  and  sell 
wheat,  how  can  it  be  doubted  that  they  could  lawfully 
agree  in  their  articles  of  co-partnership  that  neither 
member  of  the  firm  should  come  in  competition  with  the 
firm,  and  that  wheat  should  not  be  purchased  for  more 
than  a  certain  price  nor  sold  for  less  than  a  certain  other 
price  ?  Such  an  agreement  would,  certainly,  not  upon  its 
face  be  unlawful,  and  could  only  be  condemned  by  proof 
that  it  was  part  of  a  conspiracy  to  control  prices  of 
create  a  monopoly,  or  that  it  was  made  for  some  other 
unlawful  purpose/' 


—246— 

In  Dolph  vs.  Troy  Laundry  Machinery  Co.,  28  Fed., 
553,  555,  Judge  Wallace  said: 

"It  is  not  obnoxious  to  good  morals,  or  to  the  rights 
of  the  public,  that  two  rival  traders  agree  to  consolidate 
their  concerns,  and  that  one  shall  discontinue  business, 
and  become  a  partner  with  the  other,  for  a  specified 
term.  It  may  happen,  as  the  result  of  such  an  arrange- 
ment, that  the  public  have  to  pay  more  for  the  com- 
modities in  which  the  parties  deal;  but  the  public  are 
not  obliged  to  buy  of  them.  Certainly,  the  public  have 
no  right  to  complain,  so  long  as  the  transaction  falls 
short  of  a  conspiracy  between  the  parties  to  control 
prices  by  creating  a  monopoly." 

Union  Pacific  Coal  Company  vs.  United  States,  173 
Fed.,  737  (C.  C.  A.  8th  Cir.,  Nov.  19,  1909).  Judge  San- 
born: 

"There  are  lawful  and  unlawful  combinations  of 
persons  conducting  interstate  and  international  com- 
merce, and  undoubtedly  the  former  vastly  outnumber 
the  latter.  There  is  no  presumption  that  two  or  more 
persons  who  have  combined  to  conduct  interstate  or  inter- 
national commerce,  are  guilty  of  a  combination  in  re- 
straint of  that  commerce." 


Fechteler  vs.  Palm  Bros.  &  Co.,  133  Fed.,  462,  471 : 

A  corporation  and  a  partnership  engaged  in  the  manu- 
facture and  sale  of  silk  goods  of  a  special  character,  formed 
an  agreement  by  which  each  was  to  sell  the  other  goods  at 
cost  price,  and  to  pay  the  other  a  percentage  of  its  gross 
profits.  In  the  opinion  of  the  Circuit  Court  of  Appeals, 
holding  the  agreement  legal,  Judge  Lurton  said: 

"Another  ground  of  demurrer  is  that  the  contract 

is  in  restraint  of  trade  and  void  as  against  public  policy. 


—247— 

It  is  difficult  to  see  upon  the  face  of  the  contract  in  suit 
any  purpose  to  illegally  restrain  trade  or  commerce, 
bring  about  a  monopoly,  or  enhance  prices  illegally, 
either  under  the  Ohio  statute  (93  Ohio  Laws,  143)  or 
at  common  law.  It  has  never  yet  been  supposed  that, 
if  one  mercantile  house  or  manufacturing  concern  ob- 
tained an  interest  in  the  other,  such  a  contract,  irrespec- 
tive of  all  actual  or  probable  effect  upon  the  public, 
would  be  a  contract  void  as  tending  to  monopoly.  It 
may  be  that  these  two  establishments  were  the  sole 
makers  or  dealers  in  the  goods  they  dealt  in,  and  that 
an  enhancement  of  prices  would  therefore  follow,  to  the 
public  detriment.  But  we  can  know  nothing  about  the 
importance  of  the  dealing  between  these  concerns,  ex- 
cept that  which  appears  upon  the  face  of  the  bill  and  its 
exhibit — the  contract  sued  upon." 


Wheeler-Stenzel  Company  vs.  American  Window  Glass 
Cc.,  Mass.,  89  N.  E.,  28  (June  22,  1909)  : 


The  plaintiff  and  many  other  jobbers  in  window  glass 
were  stockholders  in  the  National  Window  Glass  Jobbers' 
Association,  and  had  contracts  with  this  association  by  which 
it  agreed  to  purchase  window  glass  in  large  quantities,  and 
distribute  it  among  the  plaintiff  and  its  other  members. 


In  holding  that  these  contracts  were  legal,  the  Supreme 
Judicial  Court  said: 

*  it  does  not  appear,  if  material,  what 
proportion  of  the  window  glass  jobbers  in  the  United 
States  is  included  in  the  association.  It  may  be  a  small 
proportion.  But  whether  large  or  small  there  can  be 


—248— 

no  doubt,  we  think,  that  those  included  in  the  associa- 
tion  had  a  right  to  combine  and  appoint  a  common  agent, 
which,  according  to  the  allegations  of  the  declaration, 
was  in  effect  what  was  done,  to  make  purchases  of  win- 
dow glass  for  them,  and  to  distribute  the  window  glass 
so  purchased  amongst  them  according  to  contracts 
severally  entered  into  by  them  with  such  agent.  They 
had  the  right  to  enter  into  such  an  arrangement  even 
though  one  of  the  objects  of  it  was  to  avoid  competing 
with  each  other  in  the  market  for  window  glass/' 


THE  PRESENT  CASE  IS  UNIQUE  AND  DIF- 
FERENT FROM  EVERY  OTHER  CASE  DECID- 
ED UNDER  THE  SHERMAN  ACT,  AND  IT  IS 
NOT  OBNOXIOUS  TO  NOR  RULED  BY  ANY  OF 
THE  DECIDED  CASES. 


The  cases  decided  by  the  Supreme  Court  of  the  United 
States  may  be  put  into  groups : 

1.  Cases  where  the  different  railroad  companies 
charged  with  the  duty  of  carrying  interstate  traffic  for 
all  alike,  and  competing  for  that  traffic,  by  formal  con- 
tracts agreed  not  to  compete,  not  to  fix  competitive  rates, 
but  to  appoint  a  committee  or  some  agent  to  settle  a 
common  price  for  all.  This  was  held  to  be  a  violation 
of  the  Sherman  Act,  because  it  restricted  or  stifled  com- 
petition. 

Such  cases  are  the  Trans-Missouri  case,  166  U.  S.,  290, 
and  the  Joint  Traffic  Association  case,  171  U.  S.,  505. 


—249— 

Really  the  Northern  Securities  Case,  193  LF.  S.,  197, 
falls  under  this  class,  for,  as  the  Supreme  Court  of  the  United 
States  decided,  it  was  held  to  be  an  agreement  between  the 
stockholders  of  two  competitive  railroads  to  suppress  competi- 
tion between  them  by  practically  consolidating  the  two  rail- 
roads, and  hence  was  void  under  the  Sherman  Act  because 
it  stifled  competition. 


2.  Cases  where  different  individuals  and  corpora- 
tions engaged  in  interstate  commerce,  and  competing 
theretofore  entered  into  a  combination  whereby  they 
agreed  that  they  would  not  compete  with  each  other; 
that  they  would  not  fix  competitive  prices,  but,  by  va- 
rious devices  differing  somewhat  in  the  different  cases, 
a  uniform  price  was  to  be  established  which  would  gov- 
ern all  the  members  of  the  combinations.  But  in  each 
case  the  marked  features  were : 

(a)  The  competing  traders  agreed  by  formal  con- 
tract to  no  longer  compete : 

(b)  They  agreed  that  the  prices  for  all  the  com- 
petitors should  thereafter  be  fixed  without  competition 
and  by  a  selected  body : 

(c)  They  provided  divers  means  by  which  others 
were  prevented    from    competing    for    the    trade;    but 
chiefly  they  were  fixing  prices  and  controlling  produc- 
tion: 

(d)  Devious  and,  in  most  cases,  unlawful  devices 
were  used  and  approved  by  the  combination: 

(e)  In  each  case  the  agreement  was  made  or  ac- 
tively continued  after  the  Sherman  Act  was  passed: 

(f)  In  no  one  of  the  cases  did  independent  com- 
petitors merge  into  a  partnership  or  corporation. 


—250— 

Such  cases  are: 

The  Addyston  Pipe  Case,  175  U.  S.,  211  (Pipe)  ; 

Swift  &  Company  vs.  U.  8.,  196  U.  S.,  376  (Beef)  ; 

The  Cincinnati  Co.  vs  Bay,  200  U.  S.,  179  (Pack- 
ets) ; 

The  Chattanooga  Foundry  Co.  vs.  Atlanta,  203  U. 
S.,  390  (Pipe)  ;  this  case  grew  out  of  the  Ad- 
dyston  Pipe  case) ; 

Montague  vs.  Loivry,  193  U.  S.,  38  (Tile). 

All  of  these  cases  were  held  to  be  in  restraint  of  compe- 
tition, and  therefore  void  under  the  Sherman  Act. 

3.  The  Northern  Securities  Case:  We  have  at 
length  (p.  31-47)  considered  this  case  and  show  the 
broad  difference  between  it  and  the  present  case. 
Hence,  we  only  briefly  refer  to  it  here :  The  method  of 
the  combination  in  this  case  was  different,  but  in  realty 
that  constitutes  the  sole  distinction  between  it  and  the 
Trans-Missouri  and  the  JointTraffic  Cases,  for  in  the 
Northern  Securities  Case,  as  in  the  former,  the  owners 
of  the  Great  Northern  and  the  Northern  Pacific  rail- 
roads made  a  combination  in  restraint  of  interstate 
trade.  Each  of  these  railroads  was  a  common  carrier, 
bound  to  carry  for  all  alike  and  at  reasonable  prices,  and 
each  was  the  competitor  of  the  other  for  a  large  amount 
of  the  freight  in  the  Northwestern  portion  of  the  country. 

The  Supreme  Court  in  the  Pearsall  case  had  held  that 
to  combine  the  stock  of  the  two  competing  railroads  would 
be  illegal. 

The  stockholders  did  attempt  to  do  so  through  a  New 
Jersey  corporation  and  the  Court  held  a  New  Jersey  cor- 
poration could  not  authorize  them  to  violate  a  federal  law. 


In  our  case  we  do  not  rely  on  the  New  Jersey  corporation 
to  give  us  rights  we  did  not  possess  before  or  to  authorize  us 
to  violate  a  federal  law. 

We  use  the  New  Jersey  Standard  Oil  corporation  merely 
as  a  convenient  method  of  holding  our  property,  not  to  gain 
a  new  power — not  to  smother  competition. 


Direct,  Immediate,  Substantial. 

4.  Only  combinations  which  directly  and  imme- 
diately and  necessarily  and  substantially  restrain  inter- 
state trade  or  commerce  are  within  the  provisions  of  the 
Sherman  Act.  Even  attempted  state  monopolies,  as  in 
the  Sugar  case,  or  combinations  restricting  the  liberty  of 
the  individuals  as  to  local  state  traffic,  and  which  only 
indirectly  affect  interstate  trade,  are  not  within  the  act. 

U.  S.  vs.  Knight  &  Co.,  156  U.  S.,  1 ; 

Hopkins  vs.  U.  S.f  171  U.  S.,  579; 

Anderson  vs.  U.  8.,  171  U.  S.,  604; 

The  Cincinnati  Co.  vs.  Bay,  200  U.  S.,  179. 


5.  Another  class  of  cases  is  where  there  was  a  di- 
rect combination  to  restrain  by  force  persons  engaged 
in  interstate  trade  or  commerce,  and  these  were  held 
to  contravene  the  Sherman  Act. 


Tn  re  Debs,  158  U.  S.,  564.  (Though  this  case  was  not 
by  the  Supreme  Court  of  the  United  States  decided  strictly 
under  the  Sherman  Act). 

Loewe  vs.  Lawlor,  208  IT.   S.,  274   (the  Hatters' 
case). 


—252— 

6.  Then  comes  a  class  of  cases  in  reference  to  the 
enforcement  by  combinations  of  contract  of  sale,  and 
here  the  distinction  is  that  if  the  sale  (as  in  the  Con- 
nelly case)  was  only  an  incident  of  the  combination, 
and  the  suit  to  maintain  it  did  not  require  the  proof  of 
the  combination,  and  the  plaintiff's  right  to  recover  did 
not  lay  through  the  combination;  that  the  combination 
might  recover.  But  if,  on  the  other  hand  (as  in  the 
paper  case)  the  action  involved  the  combination  itself 
and  it  became  part  of  the  plaintiff's  case  and  in  order  to 
recover  the  plaintiff  had  to  prove  the  combination,  then 
there  could  be  no  recovery. 

Connelly  vs.  Union  Sewer  Pipe  Company,  184  U. 
S.,  540; 

Continental  Wall  Paper  Co.  vs.  Voight,  212  U.  S., 
227. 


7.  There  are  also  cases  where  (as  in  the  Harrow 
Case),  the  exclusive  feature  was  granted  by  patents,  and 
the  contract  was  in  pursuance  of  the  exclusive  right 
given  by  patents;  also  other  cases  in  which  it  was 
held  that  a  contract  by  which  A  sold  to  B  a  certain 
business,  and  covenanted  not  to  engage  in  that  business 
for  a  certain  length  of  time,  was  good,  though  it  was 
admitted  that  this  covenant  was  in  restraint  of  competi- 
tion and  thereby  in  restraint  of  trade,  yet  it  was  not  in 
contravention  of  the  Sherman  Act. 

Bement  vs.  National  Harrow  Co.,  186  U.  S., 
70; 

Field  vs.  Barber  Asphalt  Co.,  194  U.  S.,  618; 

Board  of  Trade  vs.  Christie  Grain  &  Stock  Co., 
198  U.  S.,  236. 


—253— 

The  case  at  bar  is  not  included  in  or  ruled  by  or  like  unto 
any  one  of  the  cases  above  cited. 

The  Tobacco  Case,  164  Fed.  Kep.,  701: 

As  that  case  has  been  argued  and  is  now  before  this 
Court,  it  would  hardly  be  proper  to  discuss  it.  We  but  call 
attention  to  its  marked  and  controlling  characteristics  as 
compared  with  those  in  this  case. 


CASE  AT  BAR. 


In  our  case,  is  an  orderly  development  and  growth,  be- 
ginning in  1862,  of  a  hitherto  practically  unknown  product 
— crude  oil — everything  about  it  was  new — unknown  and 
also  weird.  How  it  was  produced,  no  one  knew,  indeed  now 
knows.  The  rapidity  of  its  production  was  and  is  unknown. 
The  places  where  it  will  be  produced — the  quantities  any  ter- 
ritory or  any  well  will  produce  were  and  still  are  mys- 
terious. Production  leaps  from  Pennsylvania  to  Ohio — to 
Kansas — to  California — to  Texas,  and  no  one  can  foretell  the 
place  or  quantity  or  quality  of  new  production. 

The  uses  to  which  the  crude  product  could  be  put  were 
unknown.  By-products  of  the  crude  were  at  first  thrown 
away  as  useless,  but  are  now  numerous  and  of  great  value. 
Methods  of  refining  the  oil,  at  first  as  crude  as  the  product, 
were  gradually  improved,  and  thereby  a  larger  quantity  of 
better  quality  oil  was  produced. 

The  business  required  large  capital  to  carry  on  success- 
fully— to  devise  new  methods  of  refining  and  of  transporting 
and  of  storing  the  oil.  The  risk  of  the  business  was  enormous 


—254— 

— uncertainty  of  production — of  size  of  production — of 
quality  of  production,  were  all  marked.  Cessation  of  crude 
oil  capable  of  refining  meant  the  practical  entire  loss  of  in- 
vestment. The  chances  of  fire  and  of  loss  by  evaporation  etc., 
etc.,  added  to  the  risk. 

It  was  a  business  whose  proper  development  required 
a  large,  well  capitalized,  efficient  company,  and  only  by  such 
could  it  be  properly  handled. 

It  is  undisputed  that,  starting  in  1862  in  a  small  way, 
with  small  capital,  John  D.  Rockefeller,  subsequently  joined 
by  others,  by  untiring  energy,  remarkable  skill,  abundant 
capital,  necessary  and  continuous  toil,  began  a  business  he 
and  they  nurtured  and  developed  and  grew  to  the  size  it  is  to- 
day. The  law  of  competition  governed  the  strife  and  gave 
the  award. 


MARKED    DIFFERENCES    BETWEEN    THESE 
CITED  CASES  AND  THE  PRES- 
ENT CASE. 

In  the  case  at  bar  the  joint  ownership  was  formed  long 
prior  to  the  Sherman  Act,  and  the  properties  were  owned 
long  prior  to  that  date  (with  trivial  exceptions  noted).  The 
combination  was  simply  and  only  a  joint  ownership  of  prop- 
erty by  a  number  of  individuals.  There  was  no  covenant 
between  them  not  to  compete;  there  was  no  covenant  by 
which  a  standard  price  could  be  fixed  or  production  con- 
trolled ;  there  was  no  covenant  for  division  of  territory ;  and 
no  agreement  to  prevent  others  from  joining  in  the  trade;  it 
was  simply  and  only  the  joint  ownership  of  different  parcels 
of  property  used  in  the  same  business  where  the  economic 


—255— 

laws  governing  such  property,  and  the  use  of  the  same  would, 
as  a  rule  of  trade,  dictate  to  a  large  extent  the  modes  of 
carrying  on  the  business. 

At  the  time  that  the  Sherman  Act  was  passed  none  of 
these  properties  were  competitive.  That  they  have  not  since 
become  competitive  we  consider  and  prove  elsewhere.  Since 
the  passage  of  the  Sherman  Act,  the  only  properties  pur- 
chased by  these  joint  owners  are  given  in  the  brief  on  facts. 

The  properties  being  jointly  owned  and  in  a  common 
interest,  were  not  required  by  any  law  to  compete  with  each 
other  any  more  than  the  members  of  a  partnership  could  be 
required  so  to  do. 

"The  law  does  not  and  did  not  require  that  these 

parties  should  compete  in  the  purchase  of  produce." 

Fairbanks  vs.  Leary,  40  Wisconsin,  642,  643. 


The  Sherman  Act  did  not  compel  such  competition. 
Nothing  is  more  common  among  joint  traders  than  a  cove- 
nant that  each  trader  will  give  all  his  energies  to  the  joint 
business.  In  partnerships  such  a  covenant  is  most  usual.  The 
growth  of  the  group  of  non-competing  properties  owned  in 
1890  has  been  the  natural,  healthy  inevitable  result  of  an 
unique  business  carried  on  with  great  skill  and  attention  to 
details,  where  every  economic  rule  was  adopted  and  carried 
out  which  enabled  the  joint  owners  of  the  property  to  utilize 
the  same  not  only  to  the  great  benefit  of  the  public,  but  to  the 
legitimate  enrichment  of  themselves.  The  joint  group  did 
engage  in  a  war  of  competition,  but  its  warfare,  and  its  means 
of  warfare,  and  the  weapons  that  it  used,  were  not  different 
from  or  other  than  those  used  by  its  adversaries  when  op- 
portunity offered. 


—256— 

Prices  were,  from  time  to  time  cut,  but  generally  to 
meet  the  tactics  of  the  adversary.  The  group  endeavored  to 
thoroughly  understand  the  oil  business  in  all  its  branches,  in- 
cluding the  customers  and  tradesmen  of  its  adversaries,  as  do 
all  business  men  in  different  lines  of  business  in  which  each 
is  engaged.  The  group  did  endeavor  to  attract  to  it  custom- 
ers of  the  adversaries,  as  did  the  adversaries  that  of  the 
group. 

These  defendants  were  not  quasi  public  corporations 
like  railroads  owing  peculiar  duties  to  the  public  but  private 
traders. 

And  we  especially  refer  to  the  Brief  on  Facts  as  elab- 
orating and  proving  our  developments. 


Gathering  up. 
Look  at  the  things  we  have  proven. 

The  case  comes  into  this  Court  absolutely  relieved  of  all 
the  charges  of  fraud  and  illegal  conduct  on  the  part  of  the 
appellants.  The  Government  cannot  point  to  a  single  finding 
of  the  Court  below  of  improper  or  illegal  conduct  on  the 
part  of  appellants.  Such  charges  in  the  Bill  are  not  sustained 
by  the  court  below,  and  the  decree  of  the  court  below  is  not 
founded  on  any  of  them. 

Our  rights  under  the  federal  laws  as  to  interstate  and 
foreign  trade  in  oil  are,  among  others,  these : 

As  citizens,  we  were  entitled  to  enter  into  and  take  part 
in  that  trade,  and  this  not  as  a  statutory  or  a  state  favor, 
but  because  we  were  citizens  of  the  United  States. 


—257— 

We  were  entitled  as  of  right  to  join  with  us  in  that 
trade  other  citizens,  and  with  them  form  partnerships  or  cor- 
porations or  trusts  for  the  legitimate  purpose  of  carrying  on 
the  trade. 

The  number  of  other  citizens  to  be  thus  joined  and  when 
we  would  join  them,  was  not  controlled  by  any  law,  but  was 
left  to  us  to  determine. 

The  mere  size  of  our  partnership — or  our  trust — as  to 
numbers  or  capital  was  not  controlled  by  any  federal  law — 
neither  huge  capital  nor  great  numbers  in  a  partnership,  trust 
or  corporation  was  or  is  per  se  unlawful. 

It  was  not  so  at  Common  Law  and  certainly  is  not  so 
under  the  Sherman  Act. 

The  number  of  our  refineries  was  left  by  the  law  for  us 
to  determine;  it  was  just  as  lawful  for  us  to  build  100  re- 
fineries as  one. 

The  ownership  in  connection  with  them  and  for  joint 
use  with  them  of  pipe  lines  to  carry  the  crude  oil  to  them — 
of  reservoirs  to  hold  that  oil — of  tank  cars  and  ships  to  carry 
the  refined  oil — of  manufactories  to  make  the  by-products, 
and  of  marketing  stations  to  sell  the  whole  production,  was 
not  forbidden  by  any  law. 

The  places  where  we  would  build  and  operate  all  these 
plants  and  their  proximity  to  each  other,  were  left  to  us. 
The  mere  fact  that  some  of  the  units  were  built  so  as  to  be 
capable  of  competing  with  each  other  did  not  make  it  unlaw- 
ful for  us  to  so  erect,  and  did  not  compel  us  to  compete  with 
any  other  unit. 


—258— 

Being  joint  owners  of  all  the  plants,  we  might  operate 
them  all  as  one  whole,  each  part  finding  its  appropriate  work. 
No  one  of  the  units  that  made  up  the  whole  was  bound  to 
compete  with  any  other  unit. 

We  as  of  right  might  add  to  our  plant  as  opportunity  and 
our  means  allowed,  and  the  extent  of  our  acquisitions  was 
not  forbidden  by  any  law,  and  especially  not  by  any  federal 
law. 

We  might  make  such  acquisitions  by  such  methods  and 
for  such  considerations  as  were  satisfactory  to  the  seller. 
The  law,  and  especially  the  federal  law,  did  not  limit  us  to 
any  specific  method  of  payment  for  such  acquisitions. 

The  methods  in  which  and  by  means  of  which  we  would 
hold  our  properties  and  manage  our  enterprises  were  left  for 
us  to  select.  So  far  as  interstate  or  foreign  trade  was  con- 
cerned, we  might  hold  our  properties  and  operate  them  as 
mere  joint  owners — or  as  a  partnership — or  as  a  corporation 
— or  as  a  trust,  and  whichever  form  we  used  was  to  the  Gov- 
ernment indifferent.  All  alike  were  lawful. 

Nor  was  the  Government  concerned  as  to  how  we  held 
the  title  to  our  properties;  the  equitable  title  was  just  as 
lawful  as  the  legal  title,  and  if  the  equitable,  then  the  legal 
title  must  be  vested  in  a  trustee,  and  this,  too,  was  just  as 
lawful.  It  was  just  as  lawful  to  hold  it  through  trust  cer- 
tificates or  stock  certificates  and  one  is  as  lawful  as  the  other 
— and  the  Sherman  Act  does  not  condemn  either. 

We  were  engaged  in  a  private  trading  enterprise — we 
relied  and  had  to  rely  on  our  own  unaided  energies  and  en- 
terprise. The  Government,  neither  federal  nor  state,  gave 
us  any  aid  such  as  grants  of  property  or  eminent  domain  or 


—259— 

like  public  rights,  and  we  were  therefore  not  within  the  class 
of  railroad  companies,  gas  companies,  etc.,  etc.,  whose  public 
privileges  subjected  them  to  public  regulation  and  manage- 
ment, compelled  them  to  compete,  forbade  competing  com- 
panies to  unite. 

The  corporate  organizations  of  pipe  line  companies  in 
some  of  the  states  did  have  the  right  of  eminent  domain,  but 
this  is  but  a  comparatively  small  part  of  the  united  plant, 
and  this  right  does  not  enter  into  or  form  part  of  the  real, 
substantial  business  of  refining  and  selling  oil,  nor  qualify 
our  rights  as  private  traders  therein. 

As  such  private  traders,  we  could  sell  to  whom  we  chose, 
and  refuse  to  sell  to  others ;  could  sell  to  one  man  at  one  price, 
to  another  at  a  greater  or  less  price;  we  could  unite  what  busi- 
nesses we  chose;  could  refuse  to  sell  to  any  one;  could  buy 
our  crude  product  from  whom  we  chose  and  for  what  price  we 
chose,  more  or  less  than  the  market  price. 

The  federal  Government  only  has  jurisdiction  over 
interstate  and  foreign  commerce.  It  does  not  have  power 
over  the  thing  which  enters  into  such  commerce  until 
it  does  so  enter.  Before  it  enters  it  is  not  subject 
to  or  controlled  or  governed  by  federal  laws.  How  the 
trader  acquires  the  possession  of  such  object  does  not  concern 
the  Government,  and  certainly  not  under  the  Sherman  Act. 
The  Sherman  Act  forbids  the  restraint  of  or  the  monopoly  of 
interstate  trade  by  unlawful  means  of  exclusion  of  other 
traders,  but  it  does  not  concern  itself  with  how  the  trader 
acquires  a  title  to  the  thing  he  brings  into  interstate  trade. 
To  prove  that  A  and  B  unlawfully  gained  D's  property,  which 
they  now  put  into  interstate  trade  does  not  even  tend  to,  much 
less,  prove  a  restraint  of  interstate  trade  or  an  attempt  by 
unlawful  means  to  monopolize  it. 


—260— 

The  refineries  and  the  trading  stations  are  not  articles 
of  commerce.  They  do  not  enter  into  interstate  commerce. 
The  titles  by  which  they  are  held  or  how  they  were  gained 
are  not  within  the  federal  jurisdiction — certainly  not  within 
the  Sherman  Act. 

Even  if  it  could  be  demonstrated  (which  it  cannot) 
that  the  appellants  procured  by  improper  means  some  of  the 
refineries  they  now  use,  and  the  product  of  which  they  put 
into  interstate  trade,  this  would  not  prove  or  tend  to  prove 
a  violation  of  the  Sherman  Act.  That  a  man  unlawfully  ac- 
quires a  refinery  does  not  prove  that  the  product  he  produces 
is  unlawful.  Especially  it  does  not  even  remotely  tend  to 
prove  that  when  he  puts  that  product  into  interstate  trade, 
he  thereby,  and  because  he  unlawfully  acquired  the  refinery, 
restricts  such  trade  or  seeks  to  monopolize  the  same. 

We  could  lawfully  compete  for  and  seek  to  monopolize 
all  or  any  part  of  the  interstate  or  international  trade  in 
oil.  We  could  make  that  competition  fierce,  aggressive  and 
unrelenting.  Could  depress  prices  to  drive  out  competitors 
and  raise  them  afterwards.  Could  give  away  oil  to  drive  out 
a  competitor.  We  could  buy  out  a  competitor  to  get  rid  of 
him.  We  could  join  the  competitor  with  us  in  our  business. 
We  could  use  all  the  shifts  and  devices  of  traders  to  succeed, 
except  that  we  could  not,  by  unlawful,  fraudulent 
means,  deprive  any  competitor  of  his  equal,  lawful  right  to 
fight  for  the  trade.  We  could  not,  by  unlawful,  fraudulent 
means,  exclude  him  from  the  trade. 

But  all  lawful  means  we  could  use — our  capital,  our 
products,  the  size  of  each,  the  entire  wealth  we  had  or 
could  borrow  and  all  our  skill,  energy,  enterprise  and  fore- 
sight— we  could  freely  use  in  the  strife  against  a  competitor 
as  the  competitor  could  also  lawfully  use  the  same  against  us.. 


—261— 

The  law  encourages  and  rewards  the  successful  com- 
petitor, and  as  a  reward  gives  to  him  the  power  he  has  cap- 
tured, i.  e.,  to  fix  prices,  exclude  by  lawful  means  others  from 
the  trade.  But  as  the  trade  is  never  the  same,  but  always 
new,  as  spring  or  summer  or  fall  trade,  the  future  trade  must 
be  left  open  to  just  such  competition  as  was  the  captured 
trade,  and  the  same  combinations,  the  same  trust  corporations 
and  combines  and  individuals  may  compete  for  it  as  before. 

The  trust  agreement  of  1882  is  not  of  itself  and  per  se 
illegal,  even  under  any  state  law.  If  formed  for  a  legal  pur- 
pose of  holding  the  property  lawfully  owned  of  a  group  of 
persons,  it  is  valid  not  void — at  common  law.  It  is  legal  to 
form  such  a  trust  as  a  method  or  medium  by  which  a  number 
of  citizens  will  engage  in  trade  both  state  and  interstate.  If 
the  trust  when  formed  lawfully  carries  on  such  business  and 
enterprise,  it  is  not  forbidden  by  the  Sherman  Act.  If  it 
does  so  unlawfully  and  thereby  restricts  interstate  trade,  or 
attempt  by  lawful  means  to  exclude  other  traders  from  it,  it 
is  obnoxious  to  the  Sherman  Act.  Each  one  of  the  state  cases 
really  went  off  on  the  proposition  that  the  trust  method  of 
managing  the  state  corporation  was  forbidden  by  state  laws. 

All  the  state  cases  cited  added  to  the  mere  formation  of 
the  trust  that  it  was  done  for  an  illegal  purpose,  i.  e.,  to  re- 
strict commerce  and  monopolize  trade. 

This  distinction  is  relied  on  in  the  Calumet-Hecla  cases 
cited  at  length  (Ante,  pp.  109-110). 

See  opinions  of  Judges  Lurton  and  Shippen. 

The  Sherman  Act  does  not  forbid  any  kind  of  an  or- 
ganization to  engage  in  interstate  trade, — neither  partner- 
ships nor  corporations — combinations  or  trusts.  Each  and 


—262— 

all  may  freely  so  engage,  but  in  so  engaging  each  is  bound 

by  the  law  common  to  all  which  is : 

"You  may  each  compete  for  the  interstate  trade, 
but  in  so  doing  you  can  use  only  lawful  means.  If  you 
use  unlawful  means — if  you  cheat  and  defraud  or  by 
force  exclude  other  traders  from  continuing  to  compete, 
you  violate  the  Sherman  Act.77 

The  Sherman  Act  does  not,  as  a  penalty  for  its  viola- 
tion, forbid  the  guilty  one  to  further  engage  in  interstate 
commerce.  It  does  not  inflict  that  penalty,  and  the  federal 
courts  cannot  inflict  it  as  was  done  in  this  case. 


The  Sherman  Act  does  not  seek  to  break  up  business  or 
disintegrate  business  organizations  or  inflict  in  an  equitable 
proceeding  any  punishment  of  that  kind.  If  it  had  so  de- 
signed, plain  words  would  have  been  used  giving  such  power  & 
to  the  Court. 

It  merely  seeks  to  enjoin — restrain — prevent  illegal 
means  being  continued  by  which  any  organization  seeks  to 
restrict  competition.  When  the  illegal  methods  are  abolished, 
competition  becomes  free,  and  all  may  lawfully,  now  using 
only  lawful  means,  enter  the  list. 

The  Court  below  has  not  found  in  favor  of  the  Govern- 
ment on  any  of  the  charges  in  the  Petition  as  to  fraud,  deceit 
or  unlawful  conduct  of  any  kind  on  part  of  appellants.  All 
these  were  alleged  in  the  Petition — denied  in  the  Answer* 
Tne  Court  eliminates  them  from  consideration.  The  Gov- 
ernment does  not  except  to  this  method  of  treatment  nor  ap- 
peal from  it,  but  stands  in  this  Court  on  the  opinion  and  de- 
cree of  the  Court  below. 


—263— 

The  Court  below  on  the  issues  of  fact  as  to  whether 
there  was  a  conspiracy,  found  there  was  one,  but  it  did  not 
begin  until  after  1890.  Therefore,  there  couM  not  have  been 
acts  of  the  conspiracy  done  prior  to  its  formation.  There- 
fore, all  the  acts  prior  to  1890  are  immaterial. 


Re-statement  of  most  material  points. 

From  all  these  things,  we  gather  the  following  as  impor- 
tant in  directing  our  examination  of  the  facts : 


FIRST.  To  prove  as  against  private  traders  a  restraint 
of  trade  under  Section  One  of  the  Sherman  Act,  you  must 
prove  an  actual  restraint,  not  a  mere  attempt  to  restrain. 
(The  rule  is  probably  different  as  to  quasi  public  corpora- 
tions such  as  railroads.)  That  restraint  must  be  by  contract 
or  combination  or  conspiracy.  It  must  be  of  interstate  trade 
and  must  be  direct,  immediate  and  substantial.  The  mere 
restraint  which  necessarily  follows  from  the  lawful  gains  of 
competition  in  not  a  violation  of  the  Sherman  Act,  for  if  so, 
competition  would  be  killed  and  the  purpose  of  the  Sherman 
Act  defeated. 

SECOND.  To  prove  a  monopoly  under  Section  II,  you 
must  prove  that  the  individual  or  combination  gained  the 
control  of  interstate  trade  in  oil,  or  attempted  to  gain  the 
same  by  unlawful  means.  If  such  gain  was  made  or  at- 
tempted to  be  made  by  lawful  means,  the  law  allows  it  and 
the  very  purpose  of  the  Sherman  Act  was  to  protect  it  and 
further  it,  for  it  made  competition  free.  As  bearing  on  the 
question  of  the  lawfulness  of  the  means  employed  in  gaining 
control  of  the  oil  trade,  one  has  to  take  into  view  the  economic 
situation,  and  here  it  will  be  seen  that  the  evolution  of  such 


—264 — 

a  combination  as  the  Standard  Oil  Company  was  a  necessary 
and  inevitable  consequence  of  the  laws  of  trade  as  applied 
to  such  a  unique  and  unparalleled  industry  as  the  production 
and  refining  and  sale  of  crude  oil  and  its  products. 

See  brief  on  facts. 

THIRD.  Any  competitor  in  trade  may  buy  the  business 
of  another  or  others  or  as  many  as  he  can,  and  for  the  ex- 
press purpose  of  getting  rid  of  their  competition.  If  by  the 
lawful  means  of  competition  he  compels  them  to  sell  to  him, 
it  is  legitimate  gain. 

Competition  knows  no  restriction  except  that  the  means 
used  shall  be  lawful.  The  question  of  whether  it  is  fair  or 
unfair,  or  due  or  undue,  or  reasonable  or  unreasonable  has 
nothing  whatever  to  do  with  it.  The  sole  test  is:  Were  the 
means  used  in  competition  lawful. 

FOURTH.  And  the  test  of  lawfulness  in  the  interstate 
trade  is  not  the  State  law,  statutory  or  common,  but  it  is  the 
Federal  law,  and  it  is  the  Federal  law  within  the  commerce 
clause  of  the  Constitution.  To  point  out  that  any  given  thing 
done  by  the  defendants  in  the  gaining  of  the  so-called  mon- 
opoly was  unlawful  and  criminal,  the  Government  must  show 
some  Federal  law  which  made  it  so.  The  thing  charged  in 
this  petition  is  a  crime.  Ther<*  are  no  crimes  under  the  Fed- 
eral law  except  that  which  Congress  declares,  and  therefore 
only  Congressional  Federal  legislation  can  be  relied  upon  by 
the  Government  in  proof  that  the  defendants  had  committed 
a  crime  in  attempting  a  monopoly  prior  to  the  Sherman  Act 
of  1890. 

The  individual  defendants  are  not  only  citizens  of  the 
United  States,  but  they  are  citizens  of  the  State  in  which 


—265— 

they  reside.  Each  sovereign  has  a  distinct  and  independent 
jurisdiction,  and  neither  relies  upon  nor  carries  out  the  laws 
of  the  other.  The  action  of  these  citizens  of  the  United  States 
in  interstate  trade  prior  to  1890  and  subsequently  must  be 
tested  by  Federal  laws;  and  it  is  wholly  indifferent  that 
their  actions  might  have  been  in  conflict  with  any  of  the  laws 
of  any  of  the  States. 

The  right  of  the  individual  as  a  citizen  of  the  United 
States  to  fully  engage  in  the  interstate  trade  antedates  the 
constitution. 

In  Gibbons  vs.  Ogden,  9  Wheaton  211,  Marshall,  C.  J., 
said: 

"Pursuing  this  inquiry  at  the  bar,  it  has  been  said 
that  the  constitution  does  not  confer  the  right  of  inter- 
course between  State  and  State.  That  right  derives  its 
source  from  those  laws  whose  authority  is  acknowledged 
by  civilized  men  throughout  the  world.  This  is  true. 
The  constitution  found  it  an  existing  right  and  gave  to 
Congress  the  power  to  regulate  it." 

In  Oilman  vs.  Philadelphia,  3  Wall.  713,  737,  Mr.  Jus- 
tice Clifford  said  that  the 

"right  of  intercourse  between  State  and  State  was  a 
common  law  privilege,  and  as  such  was  fully  recognized 
and  respected  before  the  Constitution  was  formed. 
Those  who  framed  the  instrument  found  it  an  existing 
right." 

It  has  no  constitutional  limitation:  it  can  be  re- 
strained only  by  Congressional  action;  and  there  was  no 
such  Congressional  action  prior  to  1890  when  the  Sherman 
Act  was  passed.  The  federal  courts  cannot  of  themselves 
restrict  that  liberty  except  as  the  result  of  Congressional 
action. 


—266— 

FIFTH.  The  trust  agreement  of  1882  when  it  was  made 
was  not  of  itself  and  per  se  illegal  under  the  common  law, 
either  state  or  federal.  It  was  made  for  the  more  economic 
and  convenient  management  of  the  joint  properties  used  by 
the  Standard  group  in  the  oil  business ;  it  was  lawful.  It  has 
not  been  shown  it  was  made  for  any  other  purpose.  The 
mere  method  in  which  joint  traders  will  hold  their  joint  prop- 
erties is  not  prescribed  by  the  Sherman  Act.  All  methods 
are,  under  it,  lawful,  but  none  of  them  may  be  used  to  violate 
the  act  by  restraining  trade  or  unlawfully  forming  a 
monopoly. 

SIXTH.  The  Agreement  of  1882  was  not  a  violation  of 
the  Sherman  Act  unless  it  was  used  to  restrain  trade  or 
monopolize  by  unlawful  means  a  portion  of  it.  The  change 
from  the  method  of  holding  under  the  Trust  Agreement  to 
that  of  a  corporate  holding  is  not  unlawful  under  the  Sher- 
man Act,  unless  such  method  is  used  for  the  unlawful  pur- 
pose of  violating  the  Sherman  Act. 

SEVENTH.  Joint  owners  of  properties  used  in  private 
trade  are  not  bound  to  compete  with  each  other,  and  the  mere 
fact  that  if  separately  owned  they  might  so  compete,  is  not  a 
violation  of  the  Sherman  Act. 

EIGHTH.  Certain  important  things  should  not  be  over- 
looked : 

(a)  That  the  point  of  time  we  are  inquiring  about 
is  November  15th,  1906,  when  the  Petition  was  filed : 

(b)  That  in  this  mode  of  proceeding  in  equity  the 
sole  question  is,  Were  the  defendants  violating  the  Sher- 
man Act  on  November  15th,  1906  ? 

(c)  Prior  violations,  if  any,  are  immaterial;  al- 
leged improper   acquisitions   of  refineries   are  not   in- 


—267— 

volved  here :  alleged  prior  acceptances  of  rebates  are  not 
involved  here: 

(d)  The  defendants  are  private  citizens  engaged 
in  a  private  enterprise  where  their  rights  and  privileges 
are  to  some  extent  different  and  otherwise  from  that 
of  railroad  corporations: 

(e)  The    defendants    deal    solely    in    crude    pe- 
troleum and  its  products.  .     This  case  does  not  involve 
any  question  as  to  the  acquisition  or  the  use  of  properties 
located  in  any  of  the  states: 

The  only  question  here  is  as  to  the  interstate 
trade  in  oil  and  its  products.  The  intrastate  trade, 
however  acquired  and  however  carried  on,  is  imma- 
terial. 


(f)  Alleged  examples  of  unreasonable  or  even  il- 
legal means  used  in  competition  prior  to  November 
15th,  1906,  or  of  the  acceptance  of  rebates  prior  to  No- 
vember, 1906,  are  irrelevant,  unless  the  unlawful  things 
be  shown  to  have  actively  continued  when  the  petition  in 
this  case  was  filed. 


It  was  perfectly  lawful,  indeed  praiseworthy,  in 
1862,  for  John  D.  Rockefeller  and  each  one  of  his  six 
associates  who  subsequently  joined  him,  to  do  sepa- 
rately and  jointly  the  following  things: 

(a)  Each  to  enter  into  and  engage  in  interstate 
and  foreign  trade  in  oil  and  its  products : 

(b)  Each  to  combine  with  one  or  more  of  the 
others  and  with  corporations  to  enter  into  and  engage 
in  such  trade: 

(c)  Each  to  seek  to  gain  for  himself  and  all  for 
themselves  in  the  legitimate  and  lawful  extension  of 


—268— 

their  business  so  much  of  the  trade  as  they  could.  No 
law,  either  State  or  Federal,  restricted  the  extent  or  per- 
centage of  their  gains  of  this  interstate  business : 

(d)  Each  and  all  might  avail  himself  and  them- 
selves of  all  the  methods  which  the  law  authorizes,  in 
part  creates  by  statutes,  to  further  this  quest  for  inter- 
state trade;  they  might  form  partnerships;  they  might 
form  trusts ;  they  might  form  corporations,  and  use  each 
or  all  of  them  in  the  furtherance  of  their  effort  to  gain 
interstate  trade. 

Assume,  (arguendo)  that  Congress  might  prohibit 
corporations  or  trusts  or  combines  from  engaging  in 
interstate  trade:  it  is  quite  certain  that  Congress  never 
has  done  so,  and  that,  as  we  have  seen  in  the  Sherman 
Act,  Congress  has,  on  the  contrary,  recognized  the  pro- 
priety of  combines  and  corporations  and  trusts  engaging 
in  interstate  trade.  No  one  of  the  seven  individual  de- 
fendants was  forbidden  by  any  Federal  law  to  join  or 
create  a  combination  or  a  corporation  or  a  trust  for  the 
purpose  of  engaging  in  interstate  trade. 

Assume  (arguendo)  that  Congress  might  limit  the 
extent  to  which  corporations  or  trusts  or  combines  or 
individuals  might  carry  on  interstate  trade:  it  is  posi- 
tively certain  that  Congress  never  has  passed  such  a  law. 

(e)  Assume  (arguendo)  that  some  year  prior  to 
1906  the  Standard  Oil  Company  after  the  passage  of 
the  Sherman  Act  attempted  to  prevent  completion  of  the 
United  States  Pipe  Line,  or  received  preferential  rates 
from  some  railroads,  etc. ;  yet  as  none  of  these  things 
were  being  done  when  the  Petition  was  filed,  they  do  not 
justify  the  Petition  which  can  and  does  only  ask  for  the 
restraint  of  what  was  going  on  when    it    was    filed    in 
November,  1906. 

(f )  Prior  to  1890  the  combining  to  restrain  inter- 
state trade  was  not  prohibited  by  Congress — was  not  by 


—269— 

any  federal  law  made  a  crime.  The  citizen  of  the  United 
States  as  such  was  not  by  any  law  forbidden  to  so  com- 
bine. There  was  no  law  giving  the  Federal  courts  power 
over  such  contracts,  even  in  restraint  of  interstate 
trade.  Until  1887,  when  the  interstate  commerce  act 
was  passed  there  was  no  Federal  law  forbidding  the 
taking  by  the  citizen  of  rebates  or  drawbacks  on  even 
interstate  shipments,  and  any  citizen  of  the  United 
States,  so  far  as  the  Federal  laws  were  concerned,  might 
take  all  the  rebates  he  could  get. 

This  does  not  conflict  with  the  Western  Union  Tel- 
egraph Case,  181  U.  S,  92,  which  involved  only  the 
duty  of  a  public  servant. 

(g)  A  combination  prior  to  1890  to  restrain  or 
monopolize  interstate  trade  was  not  only  not  a  thing  for- 
bidden by  any  act  of  Congress,  but  it  was  not  of  itself 
a  regulation  of  commerce,  nor  did  it  directly,  immediate- 
ly or  substantially  affect  interstate  trade  as  did  the  acts 
done  in  the  Debs  Case,  (158  U.  S.),  or  the  Hatters 
Case,  (208  U.  S.) 


-270— 


Facts. 

The  facts  are  exhaustively  considered  in  other  briefs, 
of  the  appellants,  but  a  very  slight  sketch  of  them  in  the 
light  of  the  foregoing  will  help,  I  think,  to  a  clearer  insight 
of  the  great  injustice  the  Court  below  unwittingly  did  us 
by  its  decree. 

The  Sherman  Act  protects  honest  traders,  however 
wealthy — however  powerful.  It  denounces  only  those  traders 
who  use  unlawful  means. 

The  intent  of  the  Sherman  Act  was  not  and  is  not  to 
cripple  trade  or  to  restrain  it  or  lessen  it,  but  on  the  con- 
trary to  free  it  and  enlarge  it. 

That  Act  is  not  concerned  with  and  did  not  and  does 
not  seek  to  determine  the  method  by  which  property  will  be 
held,  but  left  that  to  the  states  in  which  the  different  prop- 
erties were  located. 

The  Act,  being  a  criminal  one,  deals  with  malodorous 
conduct,  such  as  one  usually  attributes  to  conspirators  who 
seek  to  violate  the  law,  whose  conduct  is  wrongful  and  crimi- 
nal, immoral  and  unlawful. 

It  is  that  class  of  men  the  Act  condemns. 


—271— 

It  is  not  the  class  of  men  who  produce  and  construct 
and  build  up  and  make  successful  the  large  business  enter- 
prises of  the  day  that  the  Act  condemns. 

It  is  not  the  honest,  industrious  men  who  studied,  work- 
ed with,  conserved,  improved,  refined  and  introduced  and 
sold  to  the  world  the  extraordinary  natural  product  which, 
in  its  crude  state  of  little  value,  became  through  their  work 
the  cheapest  illurninant  of  the  world  and  a  blessing  to  man- 
kind. 

These  men  who  have  built  up  and  created  the  combina- 
tion or  the  group  of  properties  known  as  the  "Standard  Oil 
Properties"  began  their  work  in  the  earliest  period  of  produc- 
tion, 1862  to  1880,  when  crude  oil  towns  rose  and  fell  as 
mining  towns  of  the  gold  and  silver  regions  do:  when  the 
excitement  of  sudden  wealth  by  unexpected  developments  of 
crude  oil  drew  thousands  of  men  to  whom,  in  that  early 
period,  the  strict  rules  of  law  were  but  little  known,  and  were 
as  often  disregarded  by  all  as  they  were  observed. 

That  was  a  period  where  each  refiner  or  shipper  of  oil 
on  the  railroads  made  the  best  terms  he  could  for  the  trans- 
portation of  his  oil,  and  no  one  of  them  then  imagined  that 
there  was  any  other  feasible  way  to  transact  such  business. 
Like  the  transportation  in  barges  down  the  Allegheny  River 
— each  barge  owner  got  the  highest  price  he  could,  and  each 
shipper  of  oil  the  lowest  price.  It  was  a  period  when  the 
excitement  of  the  new  discoveries  of  oil  and  the  highly  specu- 
lative period  succeeding  1865  encouraged  the  building  by 
many  of  new  and  inefficient  and  poorly  built  refineries,  until 
the  capacity  of  such  refineries  far  outran  the  oil  production, 
and  the  failure  of  many  of  them  was  inevitable. 

When  new  and  enlarged  and  more  expensive  refineries 
were  imperatively  demanded  by  the  increasing  trade  and  but 


—272— 

few  men  were  able  to  provide  the  funds  adequate  for  such 
purpose,  and  still  fewer  of  them  were  willing  to  embark  in  so 
hazardous  an  enterprise:  when  the  place  or  places  of  pro- 
duction of  crude  oil  were  utterly  unknown:  when  the  con- 
tinuity of  the  production  of  any  known  well,  or  indeed  of 
any  well  at  all,  was  wholly  uncertain — men  gambled  in  such  a 
business,  took  risks,  made  sudden  fortunes  and  lost  them  as 
suddenly.  Many  incapable  men  entered  into  this  business, 
and  the  law  of  evolution  worked  in  it,  and  only  the  few  and 
the  fit  survived.  It  was  only  the  few  sober,  industrious, 
eager,  long-sighted  and  long-headed  men,  with  their  eyes  to 
the  future  and  the  great  possibilities  of  that  future,  who 
survived ;  men  who  were  willing  to  forego  the  comparatively 
small  profits  of  the  present  for  the  possible  enormous  profits 
of  the  future.  These  men  risked  their  fortunes  in  and  de- 
voted their  lives  to  this  enterprise.  They  took  all  the  ele- 
ments of  risk :  they  were  entitled  to  a  very  large  element  of 
gain. 

PRODUCTION  OF  CRUDE  OIL  IN  THE  UNITED 

STATES. 

Year.  Barrels  42  Gallons. 

1859  2,000 

1860  500,000 

1861  2,113,609 

1862  3,056,690 

1863  2,611,309 

1864  2,116,109 

1865  2,497,700 

1866  3,597,700 

1867  3,347,300 

1868  3,646,117 


— 273— 

1869  4,215,000 

1870  5,260,745 

1871  5,205,234 

1872  6,293,194 

1873  9,893,786 

1874  10,926,945 

1875  8,787,514 

1876  9,132,669 

1877  13,350,363 

1878  15,396,868 

1879  19,914,146 

1880  26,286,123 

From  1859  to  1876,  the  production  of  crude  oil  was 
confined  to  the  states  of  Pennsylvania  and  New  York.  In 
the  latter  year  the  development  shifted  to  the  state  of  Ohio, 
which  began  with  31,763  barrels,  and  West  Virginia,  which 
produced  120,000  barrels.  California  also  produced  12,000 
barrels  in  that  year. 

In  1883,  Kentucky  and  Tennessee  first  produced  4,755 
barrels;  in  1887  Colorado  began  with  76,295  barrels;  in 
1889  Indiana  first  produced  33,375,  Illinois  1,460,  Kan- 
sas 500  barrels.  In  1896,  Texas  produced  1,450  barrels 
and  the  next  year  65,975 ;  and  in  1902  Louisiana  began  with 
548,617  barrels. 

The  price  of  crude  oil  prior  to  1865  varied  from  ten 
cents  a  barrel  to  sixteen  dollars  a  barrel — from  1865  to  1870 
from  $1.90  per  barrel  to  $7.25  per  barrel. 

Barrels  then  cost  from  $1.60  to  $2.10. 

Transportation  at  first  cost  from  $1.50  to  $4.00  per 
barrel. 


—274— 

\Yhen  over-production,  feverish  times,  panicky  times  of 
1873,  1880,  and  the  inevitable  consequences  of  high  specula- 
tion became  due,  dozens  of  refineries  were  of  necessity  cast 
upon  the  market,  and  were  practically  sold  for  what  they 
would  scrap. 

There  were  few  men  who  would  buy  such  refineries  and 
still  fewer  who  would  buy  any  number  of  them,  but  these  ap- 
pellants, still  looking  to  a  large  ultimate  success,  again  took 
the  risks:  they  purchased  many  of  them:  reconstructed  and 
rebuilt  some,  and  added  the  good  suitable  material  of  the 
old  to  the  enlarged  new  plant.  Many  of  them  were  incapable 
of  use  in  the  refining  of  oil. 

After  1882  they  very  largely  constructed,  built,  improved 
and  enlarged  their  own  properties. 

The  value  of  all  their  refineries  in  1882  was  $17,000,- 
000.00.  Between  1882  and  1906  they  spent  in  improving 
and  enlarging  these  over  $40,000,000.00. 

Between  1882  and  1900,  the  appellants  purchased  but 
four  refineries  of  any  importance:  the  two  Globe  Refineries, 
the  Atlas  Refinery  and  Borne,  Scrymser  &  Co.  In  1900  they 
also  purchased  a  small  refinery  in  California  as  part  of  the 
Pacific  Coast  Oil  Company.  From  1882  to  1906  these  were 
the  only  refineries  of  any  importance  they  purchased,  but 
in  that  period  they  very  largely  improved  and  enlarged  the 
other  refineries  they  owned,  and  also  greatly  improved  and 
enlarged  the  refineries  they  had  purchased  between  1882  and 
1906. 

In  1906,  the  total  output  of  refined  oil  of  the  Standard 
Refineries  was  24,188,826  barrels  of  fifty  gallons  each. 


—275— 

In  1906  the  Standard  Oil  Company  had  the  following 
refineries  in  actual  operation,  the  inventory  value  being  set 
opposite  each  separate  refinery.  (See  Defendant's  Exhibit 
269,  Vol.  19,  p.  627). 


Capacity 
bbls.  42  g. 

c 

lost. 

yearly. 

Real  Estate. 

,    Improvements. 

Atlantic    Refining    Co.,    Eclipse 
Works    Franklin    Pa         3,285  000 

23  776  00 

1  98471869 

Pittsburo"  Refinery                              461  725 

179  174  70 

203  507  17 

Atlantic      Philad.      &      Marcus 
Hook  Refineries  11,915.425 
Solar    Refining    Co  1,861,500 

975.981.43 

78,572.75 

9.468,108.91 
1,943,879.28 

Standard  Oil  Co.  (Cal.)  6,807,980 

580,429.42 

3,387,272.32 

Standard  Oil  Co.   (Ind.)   Whit- 
ing   Ind    8  192  790 

259  378  98 

7  828  708  39 

Sugar    Creek     Mo                         3011980 

30  175  00 

1  142  705  48 

Standard  Oil  Co     (Kas  )                1  645  500 

12  525  50 

477  933  77 

Standard  Oil  Co.    (N.  J.)    Bay- 
onne   Ref  13840,435 

1  988,076.96 

10061,23884 

Baltimore  Div    2  206,790 

18601344 

1  076  568  08 

Camden  Works,  Parkersburg      534,360 
Eagle   Works               .                 3  273  320 

•   44,722.56 
296  685  16 

767.035.19 
2306515  97 

Standard  Oil  Company  of  N.  Y. 
Atlas   Works,   Buffalo  982,215 

87,34851 

1,378,712  12 

Long  Island  Refy  1,950.195 

669,498  85 

1  182  646  47 

Pratt   Works,    Brooklyn  1,578,990 
Pratt  Works,  L.  I.  City,  tar..       530,710 
Sone  &  Fleming  Works  1,689,950 
Standard  Oil  Co    (Ohio)               2122840 

586,729.05 
161,773.99 
517,489.66 
501  600  54 

1,093,533.08 
1,824,310.25 
1,509,992.41 
1  439  006  80 

Vacuum     Oil     Co.,     Rochester, 

N    Y    . 

31  725  00 

514912  40 

Olean    NY                                2  578  725 

28  885  76 

857  691  22 

Total  68  470  430 

$7  240  563  26 

$50  448  996  84 

$57,680,560.10 

The  refineries  owned  in  1882  consumed  16,500,000  bar- 
rels of  crude  oil  annually;  the  present  refineries  in  1 906  had  a 
capacity  of  68,462,420  barrels  annually  (Defendant's  Ex- 
hibit 269),  and  in  that  year  actually  consumed  64,958,301 
barrels  (Defendant's  Exhibit  269).  This  consumption  was 
increased  to  about  72,000,000  barrels  in  1907  (Archbold, 
Vol.  17,  p.  3252),  and  the  capacity  of  the  refineries  has  of 
course  been  necessarily  increased  to  take  care  of  this. 


—276— 

We  are  not  able  to  exactly  gather  from  the  evidence 
the  money  the  Standard  expended  from  1882  to  1906  in 
building  and  improving  its  properties  but  we  believe  that 
approximately  the  following  are  fairly  accurate — 

Kefinery  Construction: 

1882  to  1899,  about  $30,000,000 

1900  to  1906,      "  20,000,000 

Pipe  Lines: 

1882  to  1899,   "  28,000,000 

1900  to  1906,   "  70,000,000 

Tank  cars: 

1882  to  1899,      "  3,000,000 

1900  to  1906,      "  5,000,000 

Marketing  Stations: 

1882  to  1899,      "  10,000,000 

1900  to  1906,     "  7,000,000 

Ships : 

1882  to  1899,      "  11,000,000 

1900  to  1906,      "  10,000,000 

We  arrive  at  these  figures  in  this  manner : 
In   1882    the    Standard    Oil    assets — refineries — were 
$17,000,000.00.     Vol.  17,  page  3253. 

In  1906  the  refineries  were  $57,680,560.10— of  which 
$50,448,996.84  was  for  improvements.  Defendants'  Exhibit 
269,  Vol.  19,  page  627. 


In  1883  the  assets  were  $72,869,596.46.     Petitioner's 
Exhibit  941. 

In  1906  the  assets  were  $359,400,193.31.     Petitioner's 
Exhibit  10. 


—277— 


In  1882  mileage  of  pipe  lines  was  3,531  miles.  De- 
fendants' Exhibit  261. 

In  1906  mileage  of  pipe  lines  was  54,616  miles.  De- 
fendants' Exhibit  261. 


In  1882  the  marketing  stations  were  130.  Vol.  17,  page 
3242. 

In  1906  the  marketing  stations  were  3,573.  Defendants' 
Exhibit  264. 


These  figures  accurately  show  $50,000,000.00  spent  in 
improvements  of  refineries,  and  $40,000,000.00  of  that  spent 
between  1882  to  1906. 

The  total  net  assets  between  1883  were  $72,869,596.46, 
and  in  1906,  $359,400,193.31. 

This  gave  an  increase  of  about  $280,000,000.00. 

We  estimate  from  increase  in  pipe  lines,  marketing  sta- 
tions, etc.,  the  expenditures  in  constructing  them. 


As  the  early  oil  business  grew,  pipe  lines  called  "gather- 
ing lines"  to  take  the  oil  from  the  well  and  deliver  it  to  the 
refinery  became  necessary,  and  these  men  acquired  part,  but 
in  large  manner  actually  built  many  of  these  lines.  They 
also  laid  out  and  built  pipe  lines  connecting  the  West  with 
the  Atlantic  Ocean  in  the  East. 


—278— 

Tn  1882  the  Standard  interests  owned,  through  purchase 
and  through  construction  2,468.60  miles  of  gathering  lines 
and  1,062.95  miles  of  trunk  lines  (Defendant's  Exhibit  261), 
of  which  latter  all  but  about  48  miles  (the  Columbia  Conduit 
Company,  purchased  in  1877)  was  entirely  a  Standard  con- 
struction (Archbold,  Vol.  17,  p.  3630).  From  1882  to  the 
present  time  the  Standard  has  bought  (outside  of  the  Cali- 
fornia field)  only  about  300  miles  of  pipe  line  (Archbold, 
Vol.  17,  p.  3233).  The  growth  of  the  pipe  lines  since  1882 
is  due  to  actual  construction  work  by  the  Standard  itself; 
and  in  1908  it  owned  outside  of  the  California  field  45,227.74 
miles  of  gathering  lines  and  9,388.91  miles  of  trunk  lines, 
making  a  grand  total  of  54,616.65  (Defendant's  Exhibit  261, 
Vol.  19),  over  50,000  miles  of  which  were  absolutely  the 
Standard's  own  construction. 

A  graphic  and  striking  illustration  of  the  growth  of  the 
pipe  line  system  from  1882  to  1908  is  shown  by  defendants- 
Exhibit  262.  The  vastness  of  this  branch  of  the  Standard's 
business  is  shown  by  the  fact  that  in  1889  the  investment  in 
pipe  lines  was  $21,386,362.76,  and  in  1906  it  had  grown  to 
$61,518,357.74. 

In  1882,  they  had  of  these  pipe  lines  3,531.55  miles; 
in  1899  they  had  increased  to  14,653.63  miles;  in  1908  to 
54,616.65  miles. 


—279— 

After  1882  the  production  of  crude  oil  largely  increased. 

INCREASED    PRODUCTION    OF    CRUDE    OIL   BE- 
TWEEN 1881  AND  1905. 

1881  27,661,238 

1882  30,349,897 

1883  23,449,633 

1884  24,218,439 

1885  21,858,785 

1886  28,064,841 

1887  28,283,483 

1888  27,612,025 

1889  35,163,513 

1890  45,823,572 

1891  54,292,655 

1892  50,514,657 

1893  48,431,066 

1894  49,344,516 

1895  52,892,276 

1896  60,960,361 

1897  60,475,516 

1898  55,364,233 

1899  57,070,850 

1900  63,620,529 

1901  69,389,194 

1902  88,766,916 

1903  100,461,337 

1904  117,080,960 

1905  134,717,580 


—280— 

Ileservoirs  to  hold  the  oil  and  prevent  its  destruction  as 
heretofore,  became  necessary,  and  millions  of  dollars  were 
invested  by  these  men  in  their  construction,  thereby  saving 
the  oil  for  thousands  of  producers  who  otherwise  would  have 
lost  the  same.  In  1906  they  had  about  80,000,000  barrels 
of  crude  oil  stored. 

In  1875,  the  total  storage  of  crude  oil  did  not  exceed 
3,000,000  or  4,000,000  barrels;  in  1886  this  had  grown  to 
32,000,000  barrels  at  an  investment  for  storage  alone  of  about 
$32,000,000.  In  1908  the  Standard  had  stored  about  85,- 
000,000  barrels. 


Tank  cars  had  to  be  built  to  transport  the  refined  oil 
from  the  refineries  in  the  West  to  the  Atlantic  Ocean  in  the 
East,  and  from  many  refineries  to  many  selling  stations,  and 
these  men  built,  out  of  their  own  resources,  10,594  cars,  which 
are  now  run  over  all  the  roads  of  the  United  States,  taking 
the  oil  practically  to  the  home  of  the  consumer.  In  this  they 
have  invested  of  their  own  money,  many  millions  of  dollars. 


—281— 

Selling  stations,  where  oil  could  be  stored  within  easy 
reach  of  the  consumer  and  delivered  to  the  consumer  speedily 
and  without  waste,  were  desirable,  and  these  men  have  con- 
structed in  the  United  States  3,573  of  them  almost  wholly 
with  their  own  money,  and  they  have  other  selling  stations 
scattered  all  over  the  world. 


Ships  of  peculiar  construction  were  necessary  to  trans- 
port the  refined  oil  to  foreign  ports,  and  these  men,  out  of 
their  own  resources,  built  such  ships  and  they  now  cross  the 
Atlantic  and  carry  millions  of  barrels  of  oil  for  public  con- 
sumption in  Europe  and  the  East. 


Investigation  made  it  possible  that  the  by-products  of 
oil  formerly  thrown  away  could  be  utilized  and  made  valu- 
able, and  these  men,  by  the  employment  of  adequate  talent 
and  skill  and  the  expenditure  of  large  sums  of  money,  have 
produced  more  than  twenty  by-products  from  this  crude  oil 
which  they  sell  all  over  the  world. 


—  282— 

Following  are  the  principal  by-products  now  produced: 

Naphtha,  Pitch, 

Gas  Oil,  Road  Oils, 

Fuel  Oil,  Asphalt  and  Paving  Resi- 

Paraffine  Oils,  duums, 

Spindle  Oil,  Roofers'  Wax, 

Wool  Stocks,  Soap  Stocks, 

Filtered  Cylinder  Oils,  Cordage  Oils, 

Unnltered  Cylinder  Oils,  Acid  Oils, 

Waxes,  Turpentine  Substitutes, 

Candles,  Engine  Distillates, 

Greases,  Petrolatum, 

Coke,  Vaseline. 

Naphtha  sales  in  the  United  States  by  the  Standard 
Refineries  grew  from  2,274,199  barrels  of  50  gallons  each  in 
1895,  to  4,958,027  barrels  in  1906. 

The  paraffine  wax  home  trade  grew  from  37,185  tons  in 
1892  to  120,496  tons  in  1907.  The  exports  of  the  same  grew 
from  29,846  tons  in  1890  to  86,752  tons  in  1906. 


All  these  things  that  these  men  have  purchased  or  im- 
proved have  all  gone  to  the  production  and  sale  of  but  one 
article — crude  oil  and  its  products.  They  have  increased  the 
sales  of  refined  oil  until  in  1906  it  amounted  to  24,188,826 
barrels  of  fifty  gallons  each. 


—283— 

They  have  increased  the  exportation  of  refined  oil  until 
in  1906  it  amounted  to  17,565,682  barrels  of  fifty  gallons 
each. 

PETITIONER'S  EXHIBIT  NO.  377. 

(Vol.  8,  page  904). 

Year.  Total  No.  of  Barrels  Exported.     Exports  S.  O. 

1900  14,788,269  13,416,486 

1901  16,549,590  14,976,822 

1902  15,576,020  13,899,406 

1903  13,836,744  11,933,037 

1904  15,227,163  13,230,096 

1905  17,629,008  15,495,080 

1906  17,565,682  15,159,164 


By  the  practice  of  rigid  economies  they  have  reduced 

the  expenses  of  the  producing,  transporting  and  refining 
of  oil.  They  have  practiced  upon  the  theory  of  large  produc- 
tion and  small  profit  until  refined  oil  is  now  sold  to  the  re- 
tail dealer  (less  freight)  at  from  six  to  ten  cents  per  gallon — 
See  Defdts.  Ex.  293  B. 


—284— 

In  the  doing  of  all  these  things,  they  have  employed 
thousands  of  men,  and  yet  not  one  of  their  employes  came 
upon  the  stand  to  complain  of  any  unfair  or  even  ungenerous 
treatment  from  these  men.  No  refiners  whatever,  except 
Emery  came  upon  the  stand  as  a  witness,  and  even  he  did 
not  prove  that  by  any  unlawful  means  the  appellants  had 
forced  them  to  sell  or  retire  from  the  business. 


All  these  different  things  which  these  men  bought  and 
built — refineries,  pipe  lines,  reservoirs,  etc., — are  naturally  a 
part  of  one  whole — all  operated  together  and  to  and  with  each 
other — all  were  useful  each  to  the  other,  and  to  be  so  useful 
must  have  a  connection  with  one  or  more  of  the  others.  Each 
was  naturally  a  companion  to  the  other. 

Many  of  these  units  become  practically  valueless  if  their 
connection  with  the  others  is  severed.  Of  what  value  were 
refineries  if  the  pipe  line  was  not  connected — of  refineries 
if  the  crude  oil  was  not  brought  to  them  by  pipe  lines — of 
the  tank  cars  for  refined  oil  unless  used  in  connection  with 
the  refineries — of  the  selling  stations  unless  supplied  from 
refineries  ? 

There  are  many  parts,  but  each  part  has  its  place,  and 
if  a  part  is  taken  out,  the  whole  structure  is  disintegrated. 


—285— 


THE  SUCCESS  OF  THE  STANDARD   OIL   GROUP,  GREAT  AS    IT  IS 
DID   NOT    CREATE  A   MONOPOLY   OF   THE  BUSINESS. 

TAKE  REFINERIES- 

DEFENDABTT'S   EXHIBIT   277. 

COMPETITIVE  REFINERIES. 


District. 


Name    and    Location. 


New    York    Harbor.  .  .  . 
Philadelphia    . .  . 


Pgh.,   Pa.,  and  vicinity, 


Other  oil  region  points, 


Ohio 


Columbia  Oil  Co.,  Constable  Hook,  N.   J. 

Valvoline  Oil  Co.,  Edgewater,  N.  J. 

Manufacturers'  Paraffine  Co.,  Phila.,  Pa.   (formerly  Par- 
agon Oil  Co.). 

Enterprise  Oil  Works,  Phila.,   Pa. 

Sunlight   Oil  &  Refining  Co.,   Phila.,  Pa. 

Pure  Oil  Co.,  Marcus  Hook,   Pa. 

National  Refining  Co.,  Marcus  Hook,  Pa. 

Sun    Company,    Marcus    Hook,    Pa. 

Crew-Levick  &  Co.,  Marcus  Hook,  Pa. 

Beaver    Refining   Co.,    Washington,    Pa. 

Canfield    Oil    Co.,    Coraopolis,    Pa. 

Freedom    Oil    Works,    Freedom,    Pa. 

Island   Petroleum   Co.,    Neville   Island,    Pa. 

West  Pittsburg  Oil  Refg.  Co.,  Neville  Island,  Pa. 

Lake  Carriers  Oil  Co.,   Coraopolis,  Pa. 

Miller's,    A.    D.,    Sons    Co..    Allegheny,    Pa. 

Pittsburg    Oil    Refining   Co.,    Coraopolis,    Pa. 

Waverly   Oil   Works,   Pittsburg,   Pa. 

American  Oil  Works,  Titusville,  Pa. 

Cold   Water  Oil  Co.,   Raymilton,   Pa. 

Conewango   Refining  Co.,   Warren,   Pa. 

Continental   Refining  Co.,   Oil   City,   Pa. 

Cornplanter   Refining   Co.,   Warren,    Pa. 

Crystal    Oil   Works,   Oil   City,    Pa. 

Dougherty,   W.   H.  &  Sons,   Petrolia,  Pa. 

Emery,   Mfg.   Co.,   Bradford,   Pa. 

Emlenton    Refining   Co.,    Emlenton,    Pa. 

Empire  Oil  Works,  Oil  City,  Pa. 

Franklin  &  Raymilton  Refining  Co.,  Raymilton,  Pa. 

Germania  Refining  Co.,  Oil  City,  Pa. 

Glade  Oil  Works,   Warren,   Pa. 

[ndependent  Refining  Co.,  Oil  City,  Pa. 

Levi   Smith,   Clarendon,   Pa. 

Penn    Lubricating   Co.,    Bradford,    Pa. 

Penna.  Refining  Co.,  Karns  City,  Pa. 

Penn   Refining   Co.,    Oil   City,    Pa. 

Penna.   Paraffine   Works,    Titusville,   Pa. 

Seneca   Oil    Works,   Warren,    Pa. 

Superior  Oil   Works,   Warren,   Pa. 

Tiona   Refining-   Co.,    Clarendon,    Pa. 

Titusville   Oil   Works,    Titusville,    Pa. 

United   Refining   Co'.,    Struthers,    Pa. 

Valvoline  Oil  Co.,   East  Butler,  Pa. 

Warren    Refining   Co.,    Warren,    Pa. 

WellsviHe  Refining  Co.,  Wellsville,  N.   Y. 

Wilburine  Oil  Works,  Warren,  Pa. 
ational  Refining  Co.,  Marietta,  O. 
terling  Oil  Works,  Marietta,  O. 

National   Refining  Co.,  Cleveland,   O. 
ig  Oil  Co.,   Toledo,  O. 

Canfield  Oil  Co.,  Findlay,  O.   (purchased  by  National  Re- 
fining Co.). 

National  Refining  Co.,  Findlay,  O. 

3arag-on   Refining  Co.,   Toledo,   O. 

Wyandot  Refineries  Co'.,  Crawford,  O.     (formerly  Wyan- 
dot   Producing  &  Refg.   Co.). 

Sun   Oil   Co.,   Toledo,   Ohio. 


—286— 


COMPETITIVE  REFINERIES— Continued. 


District. 


Name    and    Location. 


Kansas 


Oklahoma 


Illinois 


Kentucky 
Colorado 


Wyoming    ........ 

California    

Alameda    County 


Contra   Costa  County 


Fresno  County, 
Kern    County    , 


Los   Angeles    County 


San  Bernardino  County 
San  Luis  Obispo  County 
Santa  Barbara  County. 

Ventura    County 


Janey  Refining  Co.,   C'aney,   Kas. 

Chanute  Austin  Refining  Co'.,  Chanute,  Kans. 

Eastern  Kansas  Oil  Refinery,  Moran,  Kas. 

Great   Western   Oil    Refining  Co.,   Erie,   Kas. 

Kansas  &  Texas  Oil,  Gas  &  Pipe  Line  Co.,  Chanute,  Kas. 

Kansas  City  Oil  Co.,  Kansas  City,  Kas.  (formerly  Kan- 
sas City  Oil  &  Gas  Co.). 

Kansas  Co-Operative  Refining  Co.,  Chanute,  Kas. 

Kansas  Crude  Oil  &  Gas  Co.,  Chanute,  Kas. 

Kansas  Oil  Refining  Co.,  Chanute,  Kas. 

National   Refining  Co.,  Coffeyville,  Kas. 

Paola  Refining  Co.,   Paola,   Kas. 

Petrolia  Refining  Co.,  Petrolia,  Kas. 

Rollin  Refining  Co.,  Rollin,  Kas. 

Standard  Asphalt  &  Rubber  Co.,  Independence,  Kas. 

Sunflower  Oil  Co.  Niotaze,  Kas. 

Superior  Refining  Co.,  Longton,  Kas. 

Uncle   Sam   Oil   Co.,   Atchison,   Kas. 

Uncle  Sam  Oil  Co.,  Cherryvale,  Kas. 

Webster  Refining  Co.,  Humboldt,  Kas. 

Chelsea  Refining  Co.,  Chelsea,  Okla. 

Muskogee  Refining  Co.,  Muskogee,  Okla. 

Oklahoma  Refining  Co.,  Oklahoma  City,  Okla. 

Tulsa  Refining  Co'.,  Tulsa,  Okla. 

Uncle  Sam  Oil  Co.,  Tulsa,  Okla. 

Webster  Refining  Co.,  Okmulgee,  Okla. 

Leader  Oil  Co.,  Casey,  111.      (Cornplanter  Refg.  Co.). 

Mid-Continent  Oil  Refg.  Co.,  E.  St.  Louis,  111. 

Robinson  Oil  Refining  Co.,  Robinson,  111. 

Union  Oil  Co.,  East  St.  Louis,  111. 

Indian  Oil  Refining  Co.,  Georgetown,  Ky. 

Boulder  Refinery,   Boulder,  Colo. 

C9lorado  Refining  &  Oil  Co.,  Boulder,  Colo'. 

Pittsburg-Salt  Lake  Oil  Co.,  Spring  Valley,  Wym. 

Capitol  .Refining  Co.,  Stockyards,  Cal. 

Pacific   States   Refineries,   Fruitvale. 

Paraffine  'Paint  Co.,  Oakland. 

Western  Oil   Refg.  &  Mfg.  Co.,  Rodeo. 

Union  Oil  Co.   of  California,   Oleum. 

California  Fresno  Oil  Co.,  Fresno. 

Buckeye  Refg.  Co.,  Kern  River  Field  (formerly  Clark 
Oil  Refg.  Co.). 

Sunset  Oil  &  Rfg.  Co.,  Sunset  Field. 

Asphaltum  &   Oil   Refg.    Co.,   Los   Angeles. 

Atlas  Refining  Co.,  Los  Angeles  (formerly  2  refineries; 
New  Franklin  Oil  Co.  and  Atlas  Reduction  Co.). 

British  California  Oil  Co.,   Los  Angeles. 

Densmore  Stabler  Refg.  Co.,  Los  Angeles. 

Hercules    Oil    Co.,    Los    Angeles. 

Jordan  Refining  Co.,  Los  Angeles  (formerly  Meridian 
Oil  Co'.). 

Los  Angeles  Refg.   Co.,  Los  Angeles. 

Southern    Refininsr    Co.,    Los    Angeles. 

Sunset  Oil  &  Refg.  Co.,  Obispo. 

Union  Consolidated  Oil  Co.,  Los  Angeles. 

Puente  Oil  Co.,   Chino1. 

California  Petroleum  Refineries,  Oilport. 

Associated  Oil  Co.,  Alcatraz  (formerly  Alcatraz  Asphalt 
Co.) 

Santa  Paula  Oil  Co.,  Santa  Paula. 


—287— 


District. 


Texas 


Louisiana 


Name  and  Location. 


Central  Asphalt  Works,  Port  Neches,  Tex.  'sometimes 
known  as  Evangeline  Oil  Co.,  taken  over  by  Texas  Co.). 

United  Oil  &  Refining  Co.,  Beaumont,  Tex.  (formerly  Na- 
tional Refg.  Co.,  U.  S.  Oil  &  Refg.  Co.,  Union  Oil  & 
Refg.  Co.). 

Higgins  Oil  &  Fuel  Co.,  Beaumont,  Texas. 

Great  Southern  Oil  Co.,  Beaumont,  Tex.  (W.  H.  Sturman, 
of  N.  Y.,  receiver). 

San  Jacinto  Oil  Ref.  &  Tank  Car  Co.,  Corsicana,  Tex. 
(leased  by  Richardson-Gay  Oil  Co.). 

Southwestern    Oil    Co.,    Houston,    Tex. 

Gulf  Refining  Co.,  Plant  No.  2,  Port  Arthur,  Tex. 

Gulf  Refining  Co.  Plant  No.  3,  Port  Arthur,  Tex. 

The   Texas   Co.,    Port   Arthur,    Tex. 

Howard  Refining  Co.,  Port  Arthur,  Tex.  (formerly  the 
Colonia  Ref.  Co.). 

Jennings  Refining  Co.,  Jennings,  La.  (formerly  Union 
Oil  &  Refininer  Co.).. 

Record  Oil  Refining  Co.,  Port  Chalmette,  La. 

National  Oil  Works  &  Mill  Supply  Co.,  New  Orleans,  La. 


We  exported  in  1900  of  refined  oil  90.8  per  cent,  but 
in  1906  only  86.3  per  cent. 

We  produced  of  crude  oil  in  1900  31.27  per  cent.,  but 
in  1906  only  11.11  per  cent 

In  1894  the  Standard  sold  of  the  domestic  trade  62.44 
per  cent,  or  refined  oil,  but  in  1906  only  37  per  cent 


The  study  of  the  oil  industry  from  1865  to  date  will 
demonstrate  the  following: 


(a)  The  proper  development  of  that  business  required 
very  large  combinations  of  capital  and  skill. 

(b)  That   development   economically    accomplished    re- 
quired the  association  of  the  crude  oil  well — the 
gathering  lines — the  reservoirs — the  refineries — the 
tank  cars — the  ocean  steamship  vessels — the  long 
distance  pipe  lines — the  selling  stations — and  other 
facilities. 


—288— 

(c)  It  required  large  capital  to  be  successively  used  in 
experiments  whereby  refractory  crude  oil  such  as 
the  Lima  oil,  was  made  fit  for  use;  whereby  by- 
products for  years  thrown  away  were  made  useful 
commodities  for  human  consumption. 

(d)  The  shifting  nature  of  the  oil  production  from  Penn- 
sylvania to  California,  to  Texas,  to  Oklahoma  and 
other  fields,  and  the  necessity  of  the  caring  for  the 
oil  just  as  produced,  were  additional  reasons  for 
large  capital.  _ 

(e)  "No  ordinary  organization  could  have  done  this. 

(f )  Then  consider  the  foreign  business,  the  ocean  steam- 
ers to  carry  the  oil,  the  selling  stations  all  over 
Europe  and  Asia. 


This  group  of  men,  the  appellants,  has  done  all  this. 

Have    created    property — have   created    wealth — have 
added  to  the  wealth  of  our  country  and  its  taxable  property. 

Have  done  it  with  their  own  means  and  skill  and  in- 
dustry. 

Worked  at  it  from  1865  to  1910.     Risked  their  for- 
tunes in  its  development. 

And  yet  in  1910  a  Court  sitting  in  equity  struck  their 
organization  down. 


—289— 

Not  because  they  were  doing  unlawful  things — 

But  simply  because  they  made  a  mistake  as  to  the  method 
in  which  they  could  the  better  hold  their  combined  properties. 

Eespectfully  submitted. 

D.   T.  WATSON, 
JOHN  M.  FREEMAN, 
ERNEST  C.  IRWIN, 

For  Appellants. 


INDEX. 

Purpose  of  the  Brief  Preface 

I.  The  Government  has  failed    to  maintain    the  issue 

made  by  the  pleadings  that  the  seven  individual  de- 
fendants were  violating  the  Sherman  Act  when  the 
bill  was  filed 2 

II.  The  lower  court  erred  in  holding  that  the  transfer 
in  1899  to  the  Standard  Oil  Company  of  New  Jer- 
sey was  of  itself  a  violation  of  the  Sherman  Act 13 

Analysis  of  the  lower  court's  opinion 15-30 

The  transfer  in  1899  to  the  New  Jersey  Com- 
pany distinguished  from  the  organization  of 
the  Northern  Securities  Company 31-47 

The  lower  court's  theory  of  "potential"  compe- 
tition is  without  foundation 47-55 

The  lower  court  ignored  the  distinction  between 
private  and  quasi-public  corporations 55-58 

The  Sherman  Act  does  not  prohibit  the  method 
of  holding  property  by  stock  ownership 58-64 

The  properties  involved  in  this  suit  formed  a  non- 
competitive  group  prior  to  the  Sherman  Act, 
and  their  transfer  to  the  New  Jersey  corpora- 
tion in  1899  did  not  alter  their  status  or  restrict 
competition  64-81 

III.  The  decree  is  erroneous 82 

The  relief  authorized  by  the  Sherman  Act  is  neg- 
ative— to  prevent  future  violations 82-85 

The  modes  of  relief  authorized  by  the  Act  are  ex- 
clusive of  all  others 85-87 

List  of  the  decrees  that  have  been  made  under  the 
Sherman  Act  .  ...88-92 


Index. 


Decree  in  the  Coal  Roads  decision 93 

The  decree  must  be  specific,  clearly  defining  the 

particular  acts  enjoined  95-97 

Analysis  of  the  decree 97-102 

The  Act  does  not  outhorize  the  decree  to  destroy 

or  disentegrate  businesses  102-105 

The  injunction  is  unwarranted  because  no  viola- 
tions of  the  Act  were  being  committed  when 

the  bill  was  filed 105-108 

The  method  of  uniting  properties  by  stock  owner- 
ship is  not  prohibited  unless  unlawful  means 

are  used  108-112 

The  Calumet  &  Hecla  Case 109-110 

Practical  objections  to  decree 112-127 

The  Government  not  having  appealed,  if  the  facts 
found  by  the  lower  court  are  insufficient  to 
change  the  decree,  the  case  must  be  re- 
versed   128-134 

IV.     The  case,  even  if  considered  de  novo,  and  not  merely 

upon  the  findings,  shows  no  violations  of  the  Act 135 

(I)  The  case  involves  the  right  of  individual  citizens 

to  own  private  property  jointly 141 

(II)  The  case  is  restricted  to  transactions  in  inter- 
state commerce  142 

(III)  No  question  of  the  violation  of  state  laws  is 
presented   143 

(IV)  The  criminality  of  past  acts  is  not  involved.. ..146 
The  Sherman  Act  is  a  criminal  statute 147 

(V)  This  case  is  based  solely  on  the  Sherman  Act.... 148 

(VI)  The  magnitude  of  a  business  does  not  render 

it  unlawful  under  the  Sherman  Act 150-153 

(VII)  The  Sherman  Act  does  not  prohibit  the  for- 
mation of  partnerships  or  corporations 154-157 


Index.  3 

(VIII)  The  Sherman  Act  does  not  prohibit  a  pri- 
vate trader  from  purchasing  the  business  of  a 
competitor  158-163 

(IX)  A  monopoly  may  be  lawfully  gained  under 

the  Sherman  Act. 163-171 

Judge   Sanborn's   opinion   in  the   Continental 

Tobacco  case 172 

Monopoly  at  common  law 176-181 

Monopoly  under  the  Sherman  Act .  ..181-185 

(X)  What  an  individual  may  lawfully  do,  others 

may  combine  with  him  in  doing 186-189 

What  is  lawful  competition 189-206 

Constitutional  rights  of  citizens  to    engage    in 

interstate  commerce  207-213 

Analysis  of  the  Sherman  Act 214 

Partnerships  and  corporations  are  not  pro- 
hibited  215 

Section  One  prohibits  only  contracts  which  in 

fact  restrain  interstate  commerce 218 

Section  One  and  Section  Two  distinguished.. ..221 
A  monopoly  in  violation  of  Section  Two  is  not 
created  unless  unlawful  means  are  used 224 

V.     The  Government  to  maintain    its  case    must  show 

violations  of  the  Sherman  Act 227 

The  question  of  a  federal  common  law 227 

Illegality  in  transactions  executed   prior  to  the 

Sherman  Act  is  irrelevant 233 

The  Trust  Agreement  of  1882  was  lawful 236 

Right  of  individuals  to  unite  competing  prop- 
erties or  businesses  was  unquestioned  at  com- 
mon law  241 

Joint  ownership  does  not  amount  to  a  restraint 
of  competition  244 


Index. 


The  present  case  is  unique    and    different    from  every 
case  previously  decided  under  the  Sherman  Act.. 248-25 6 

Summary  of  argument 256 

Discussion  of  the  controlling  facts 270 

Appendix. 

Text  of  the  Sherman  Act 1 

Purpose  of  the  Sherman  Act  to  promote  competition     3 

Authorities  on  constitutional  rights  of  citizens 8 

Discussion  of  federal  common  law 10 

Authorities  on  federal  common  law 16 

State  cases  on  the  validity  of  the    Trust   Agreement  in 
1882  20 

Mogul  Steamship  case 32 


IN  THE 


Supreme  Court  of  the  United  States 


OCTOBER    TERM,     1909. 


No.   725. 


STANDARD  OIL  COMPANY  ET  AL.,  Appellants, 

vs. 
THE  UNITED  STATES. 


Appeal  from  the  Circuit  Court  of  the  United  States  for  the 
Eastern  District  of  Missouri. 


Appendix  to  Brief  on  the  Law  for  Appellants. 


D.  T.  WATSON, 
JOHN  M.  FREEMAN, 
ERNEST  C.  IRWIN, 

For  Appellants. 


Smith  Bros.  Co.  Inc.,  Franklin  Print,  412  Grant  St.  Pittsburgh. 


. 


APPENDIX. 


THE  SHERMAN  ACT. 

(An  act  to  protect  trade  and  commerce  against  unlawful  re- 
straints and  monopolies.) 

Be  it  enacted  by  the  Senate  and  House  of  Representa- 
tives of  the  United  States  of  America  in  Congress  assembled: 

SECTION  1.  Every  contract,  combination  in  the  form  of 
trust  or  otherwise,  or  conspiracy,  in  restraint  of  trade  or 
commerce  among  the  several  States  or  with  foreign  nations, 
is  hereby  declared  to  be  illegal.  Every  person  who  shall 
make  any  such  contract  or  engage  in  any  such  combination 
or  conspiracy,  shall  be  deemed  guilty  of  a  misdemeanor,  and, 
on  conviction  thereof,  shall  be  punished  by  fine  not  exceed- 
ing five  thousand  dollars,  or  by  imprisonment  not  exceeding 
one  year,  or  by  both  said  punishments,  in  the  discretion  of 
the  court. 

SEC.  2.  Every  person  who  shall  monopolize,  or  attempt 
to  monopolize,  or  combine  or  conspire  with  any  other  person 
or  persons,  to  monopolize  any  part  of  the  trade  or  commerce 
among  the  several  States,  or  with  foreign  nations,  shall  be 
deemed  guilty  of  a  misdemeanor,  and,  on  conviction  thereof, 
shall  be  punished  by  fine  not  exceeding  five  thousand  dollars, 
or  by  imprisonment  not  exceeding  one  year,  or  by  both  said 
punishments,  in  the  discretion  of  the  court. 

SEC.  3.  Every  contract,  combination  in  form  of  trust 
or  otherwise,  or  conspiracy,  in  restraint  of  trade  or  commerce 


—2— 

in  any  Territory  of  the  United  States  or  of  the  District  of 
Columbia,  or  in  restraint  of  trade  or  commerce  between  any 
such  Territory  and  another,  or  between  any  such  Territory 
or  Teritories  and  any  State  or  States  or  the  District  of 
Columbia,  or  with  foreign  nations,  or  between  the  District 
of  Columbia  and  any  State  or  States  or  foreign  nations,  is 
hereby  declared  illegal.  Every  person  who  shall  make  any 
such  contract  or  engage  in  any  such  combination  or  conspiracy 
shall  be  deemed  guilty  of  a  misdemeanor,  and,  on  conviction 
thereof,  shall  be  punished  by  fine  not  exceeding  five  thousand 
dollars,  or  by  imprisonment  not  exceeding  one  year,  or  by 
both  said  punishments,  in  the  discretion  of  the  court. 

SEC.  4.  The  several  circuit  courts  of  the  United  States 
are  hereby  invested  with  jurisdiction  to  prevent  and  restrain 
violations  of  this  act;  and  it  shall  be  the  duty  of  the  several 
district  attorneys  of  the  United  States,  in  their  respective- 
districts,  under  the  direction  of  the  Attorney-General,  to  in- 
stitute proceedings  in  equity  to  prevent  and  restrain  such 
violations.  Such  proceedings  may  be  by  way  of  petition  set- 
ting forth  the  case  and  praying  that  such  violation  shall  be 
enjoined  or  otherwise  prohibited.  When  the  parties  com- 
plained of  shall  have  been  duly  notified  of  such  petition  the 
court  shall  proceed,  as  soon  as  may  be,  to  the  hearing  and 
determination  of  the  case;  and  pending  such  petition  and 
before  final  decree  the  court  may  at  any  time  make  such  tem- 
porary restraining  order  or  prohibition  as  shall  be  deemed 
just  in  the  premises. 

SEC.  5.  Whenever  it  shall  appear  to  the  court  before 
which  any  proceeding  under  section  four  of  this  act  may  be 
pending  that  the  ends  of  justice  require  that  other  parties 
should  be  brought  before  the  court,  the  court  may  cause  them 
to  be  summoned,  whether  they  reside  in  the  district  in  which 


-3— 

the  court  is  held  or  not;  and  subpoenas  to  that  end  may  be 
served  in  any  district  by  the  marshall  thereof. 

SEC.  6.  Any  property  owned  under  any  contract  or  by 
any  combination,  or  pursuant  to  any  conspiracy  (and  being 
the  subject  thereof)  mentioned  in  Section  one  of  this  Act,  and 
being  in  the  course  of  transportation  from  one  State  to  another, 
or  to  a  foreign  country,  shall  be  forfeited  to  the  United  States, 
and  may  be  seized  and  condemned  by  like  proceedings  as 
those  provided  by  law  for  the  forfeiture,  seizure,  and  con- 
demnation of  property  imported  into  the  United  States  con- 
trary to  law. 

SEC.  7.  Any  person  who  shall  be  injured  in  his  busi- 
ness or  property  by  any  other  person  or  corporation  by  reason 
of  anything  forbidden  or  declared  to  be  unlawful  by  this 
act,  may  sue  therefor  in  any  circuit  court  of  the  United  States 
in  the  district  in  which  the  defendant  resides  or  is  found, 
without  respect  to  the  amount  in  controversy,  and  shall  re- 
cover threefold  the  damages  by  him  sustained,  and  the  costs 
of  suit,  including  a  reasonable  attorney's  fee. 

SEC.  3.  That  the  word  '''person,"  or  "persons,"  where- 
ever  used  in  this  act  shall  be  deemed  to  include  corporations 
and  associations  existing  under  or  authorized  by  the  laws  of 
either  the  United  States,  the  laws  of  any  of  the  Territories, 
the  laws  of  any  State,  or  the  laws  of  any  foreign  country. 

The  purpose  of  the  Sherman  Act  was  to  free  inter- 
state trade  and  further  competition. 

In  the  Northern  Securities  case,  193  U.  S.,  331,  the 
Supreme  Court  of  the  United  States  said  that  Congress,  by 
the  Anti-Trust  act, 

"has   prescribed,  the   rule   of   free   competition   among 

those  engaged  in  such  commerce." 


That  combinations  whose  tendency  is 

"to  deprive  the  public  of  the  advantages  that  follow 

from  free  competition" 
are  forbidden  by  the  Sherman  act. 

On  page  337  the  Court  said  that  the  Sherman  Act  pre- 
scribed that  interstate  trade  should  not  be  vexed  by  combina- 
tions 

"which  restrain  commerce  by  destroying  or  restricting 
competition.  We  say  that  Congress  has  prescribed  such 
a  rule  because  in  all  the  prior  cases  in  this  Court  the 
Anti-Trust  Act  has  been  construed  as  forbidding  any 
combination  which,  by  its  necessary  operation,  destroys 
or  restricts  free  competition  among  those  engaged  in 
interstate  commerce.  In  other  words,  that  to  destroy 
or  restrict  free  competition  in  interstate  commerce  was 
to  restrain  such  commerce." 


In  the  Joint  Traffic  Association  case,  171  U.  S.,  569, 
the  Supreme  Court  of  the  United  States  said  that  the  con- 
tract in  that  case 

"affects  interstate  commerce  by  destroying  competition;" 
and  then  on  the  same  page  said : 

"Has  not  Congress  with  regard  to  interstate  com- 
merce and  in  the  course  of  regulating  it  in  the  case  of 
railroad  corporations,  the  power  to  say  that  no  contract 
or  combination  shall  be  legal  which  shall  restrain  trade 
and  commerce  by  shutting  out  the  operation  of  the  gen- 
eral law  of  competition?" 

Again,  on  page  570,  the  Court  said: 

"*     *  we  think  Congress  is  competent  to  for- 

bid any  agreement  or  combination  among  them  by  means 
of  which  competition  is  to  be  smothered." 


— 5— 

Again  on  the  same  page  the  Court  said  that  Congress 
could  prohibit  contracts, 

"which  would  extinguish  all  competition." 

The  Court  said  (p.  571)  that  the  evil  of  the  agreement 
in  that  case  was  the 

"stifling  competition." 

The  Court  said  (p.  575)  that  Counsel  had  insisted  that 
the  stifling  of  competition  did  not  necessarily  restrain  com- 
merce, to  which  the  Court  replied  (577)  : 

"The  natural,  direct  and  immediate  effect  of  com- 
petition is,  however,  to  lower  rates  and  to  thereby  in- 
crease the  demand  for  commodities,  the  supplying  of 
which  increases  commerce,  and  an  agreement  whose  first 
and  direct  effect  is  to  prevent  this  play  of  competition 
restrains  instead  of  promoting  trade  and  commerce." 

Again,  on  the  same  page,  the  Court  said: 

"An  agreement  of  the  nature  of  this  one  which  di- 
rectly and  effectually  stifles  competition  must  be  re- 
garded under  the  statute  as  one  in  restraint  of  trade, 
notwithstanding  there  are  possibilities  that  a  restraint 
of  trade  may  also  follow  competition.  *  *  *" 


Addyston  Pipe  case,  175  U.  S.,  211. 
A  combination  restrains  trade  if  its 
"direct  and  immediate  effect  is  to  destroy  competition." 
(244) 

Tri  Swift  &  Company  vs.  U.   S.,  196  U.   S.,  375,  the 
Court  stated  that  the  purpose  of  the  combination  was 

"to  monopolize  the  commerce  and  prevent  competition." 
(375) 


—6— 

And  that  the  defendants  were 

"intending  to  monopolize   the   said  commerce,   and  to 
prevent  competition."     (659) 

In  United  States  vs.  Freight  Association,  166  U.  S.,  337, 
the  Court  said: 

"Competition  free  and  unrestricted  is  the  general 
rale  which  governs  all  the  ordinary  business  pursuits 
and  transactions  of  life.  Evils  as  well  as  benefits  result 
therefrom.  In  the  fierce  heat  of  competition  the  stronger 
competitor  may  crush  out  the  weaker.  Fluctuations  in 
prices  may  be  caused  that  result  in  wreck  and  disaster, 
yet  balancing  the  benefits  as  against  the  evils  the  law  of 
competition  remains  as  a  controlling  element  in  the 
business  world." 

United  States  vs.  E.  C.  Knight  Co.,  156  U.  S.,  16, 
Fuller. 


Hopkins  vs.  United  States,  171  U.  S.,  587. 
Anderson  vs.  United  States,  171  U.  S.,  617. 


Bement  vs.  National  Harrow  Co.,  186  II.  S.,  94. 
The  agreement  was  held  valid  because  it 
"had  no  purpose  to  stifle  competition." 


Montague  &  Co.  vs.  Lowry,  193  U.  S.,  46. 
Harriman  vs.  United  States,  197  U.  S.,  291, 


—  7— 

Chattanooga   Foundry    vs.    Atlanta,    203    U.    S.,    396, 
Holmes,  J. : 

"One  object  of  the  combination  was  to  prevent  other 
producers     *     *     *     from  competing/' 


Shawnee  Compress  Co.  vs.  Anderson,  209  IT.  S.,  435, 
McKenna,  J.,  approved  the  state  court's  statement  holding 
the  lease  illegal,  because 

"competition  within  that  district  is  annihilated/' 


Waters-Pierce  Oil  Co.  vs.  Texas,  212  U.  S.,  110,  Day, 
J. :  The  Sherman  Act  condemns  any  combination  which 
tends 

"to  deprive  the  public  of  the  advantages    which    flow 

from  a  free  competition/' 


Continental  Wall  Pap-er  vs.  Voight  &  Sons  Co.,  212 
U.  S.,  256. 


—8— 


CONSTITUTIONAL  RIGHTS  OF  CITIZENS. 

Authorities  continued  from  p.  213  of  brief. 

In  the  Butchers'  Union  Company  v.  Crescent  City  Com- 
pany, 111  U.  S.  762,  Justices  Bradley,  Harlan  and  Woods 
agreed  that 

"The  right  to  follow  any  of  the  common  occupations 

of  life  is  an  inalienable  right." 

People  vs.  Max,  99  New  York,  386, 
Bertholf  vs.  O'Reilly,  74  New  York,  515. 

In  re  Jacobs,  31  Alb.  L.  J.  85. 

"The  general  rule  is  that  every  person  sui  juris  has 
a  right  to  choose  his  own  employment  and  to  devote  his 
labor  to  any  calling." 

Cooley's  Principles  of  Con.  Law,  p.  231. 

In  Munn  vs.  Illinois,  94  U.  S.,  142,  Mr.  Justice  Strong 
and  Field  held  that, 

"By  the  term  liberty,  as  used  in  the  provision, 
something  more  is  meant  than  mere  freedom  from  physi- 
cal restraint  or  the  bounds  of  a  prison.  It  means  free- 
dom to  go  where  one  my  choose,  and  to  act  in  such  man- 
ner, not  inconsistent  with  the  equal  rights  of  others,  as 
his  judgment  may  dictate  for  the  promotion  of  his  hap- 
piness ;  that  is  to  pursue  such  callings  and  avocations  as 
may  be  most  suitable  to  develop  his  capacities  and  give  to 
them  their  highest  enjoyment/' 

In  Allgeyer  vs.  Louisiana,  165  U.  S.,  578-589,  the  Court 
said: 

"The  liberty  mentioned  in  that  amendment  means, 
not  only  the  right  of  the  citizen  to  be  free  from  the  mere 


physical  restraint  of  his  person,  as  by  incarceration,  but 
the  term  is  deemed  to  embrace  the  right  of  the  citizen  to 
be  free  in  the  enjoyment  of  all  his  faculties;  to  be  free 
to  use  them  in  all  lawful  ways  ;  to  live  and  work  where 
he  will  ;  to  earn  his  livelihood  by  any  lawful  calling  ;  to 
pursue  any  livelihood  or  avocation,  and  for  that  purpose 
to  enter  into  all  contracts  which  may  be  proper,  neces- 
sary and  essential  to  his  carrying  out  to  a  successful  con- 
clusion the  purposes  above  mentioned." 

Smyth  vs.  Ames,  169  II.  S.,  522  (1897)  : 

"By  the  Fourteenth  Amendment,  it  is  provided  that 
no  state  shall  deprive  any  person  of  property  without 
due  process  of  law,  nor  deny  to  any  person  within  its 
jurisdiction  the  equal  protection  of  the  laws.  That  cor- 
porations are  persons  within  the  meaning  of  this  amend- 
ment is  now  settled." 

Santa  Clara  County  vs.  Southern  Pacific  R.  R.,  118 
U.  S.  394-596; 

Charlotte,  Columbia  &  Augusta    R.    R.    Co.    vs. 


Gulf,  Colorado  &  Santa  Fe  Railroad  Co.  vs.  Ellis,, 
165  U.  S.,  150,  154. 

In  Western  Union  Telegraph  Co.  vs.  Kansas,  216  U.  S. 
1,  21,  decided  January  17,  1910,  Mr.  Justice  Harlan  quoted 
with  approval  the  language  of  Mr.  Justice  Bradley  in 
Crutcher  vs.  Kentucky,  141  U.  S.,  57: 

"To  carry  on  interstate  commerce  is  not  a  franchise 
or  a  privilege  granted  by  the  State;  it  is  a  right  which 
every  citizen  of  the  United  States  is  entitled  to  exercise 
under  the  constitution  and  laws  of  the  United  States; 
and  the  accession  of  mere  corporate  facilities  as  a  mat- 
ter of  convenience  in  carrying  on  their  business  cannot 
have  the  effect  of  depriving  them  of  such  right,  unless 
Congress  should  see  fit  to  interpose  some  contrary  regula- 
tion on  the  subject.  *  *  *" 


—10— 

FEDERAL  COMMON  LAW. 

(Continued  from  page  229  of  brief). 

Western  Union  Telegraph  Co.  vs.  Call  Publishing  Com- 
pany, 181  U.  S.,  92,  distinguished. 

In  an  action  begun  in  a  state  court,  the  Telegraph  Com- 
pany was  held  liable  for  discrimination  in  its  charges  be- 
tween plaintiff  and  a  rival  company.  The  question  involved 
required  simply  a  determination  of  the  private  rights  of  two 
litigants  inter  se. 

But  when  the  United  States  seeks  to  restrain  or  pre- 
vent combinations  in  restraint  of  trade,  or  monopolies,  a  dif- 
ferent case  is  presented.  E"o  question  of  private  rights  is 
to  be  determined.  Combinations  to  restrain  or  monopolize 
interstate  commerce  are  not  prohibited  because  they  violate 
the  private  right  of  any  litigant.  They  are  illegal  because 
they  offend  against  the  public  policy  of  the  United  States. 
To  contravene  public  policy  is  an  offense  against  the  rights 
of  the  public,  a  violation  of  the  protection  afforded  by  the 
Government;  and  in  determining  what  amounts  to  such 
offense  or  violation,  the  private  rights  of  particular  indi- 
viduals are  ignored,  oftentimes  sacrificed. 

As  Mr.  Justice  Holmes  said  in  Beasley  vs.  Texas,  Etc. 
ft.R.  Co.,  191  U.S.,  498: 

"The  very  meaning  of  public  policy  is  the  interest 
of  others  than  the  parties." 

When,  therefore,  the  Court  enjoins  the  commission  of 
an  act  because  it  is  in  contravention  of  public  policy,  its 
purpose  in  doing  so  is  to  protect  the  rights  of  the  public, 
and  vindicate  the  authority  of  the  Government  to  protect, 
its  people  from  harm. 


—11— 

A  violation  of  public  policy  is  an  offense  against  the 
public  in  much  the  same  way  as  a  violation  of  a  criminal 
law  is.  In  a  word,  the  doctrines  of  public  policy  lie  within 
the  border-land  of  the  criminal  law.  There  are  no  crimes 
against  the  Federal  Government  until  Congress  defines  them; 
nor  are  there  any  rules  of  public  policy  under  the  Federal 
Government  till  Congress  prescribes  them. 

The  Sherman  Act  is  a  criminal  statute  through  and 
through.  It  contains  three  distinct  prohibitions  in  the  first 
three  Sections  respectively;  and  the  violation  of  each  is  made 
a  crime.  There  is  not  a  single  act  forbidden  by  the  statute, 
the  doing  of  which  is  not  declared  criminal.  Congress  en- 
acted the  statute  evidently  because  it  shared  the  view  ex- 
pressed by  Mr.  Justice  Harlan  in  United  States  vs.  E.  C. 
Knight  Co.,  156  U.  S.  1,  15 : 

"Such  combinations   (to  destroy  competition)    are 

against  common  right  and  are  crimes  against  the  public/' 

Missouri-Pacific  Railway  Co.  vs.  Larabee  Flour  Mills 
Co.,  211  IT.  S.,  612  (decided  Jan.  llth,  1909) : 

The  Supreme  Court  of  Kansas  awarded  a  shipper  a 
mandamus  to  compel  a  railway  company  to  afford  equal  local 
switching  service  for  cars  engaged  in  interstate  commerce. 
On  a  writ  of  error  to  the  United  States  Supreme  Court  the 
Railway  Company  contended  that  its  duties  were  regulated 
entirely  by  the  Federal  law,  and  that  until  the  Federal  Inter- 
state Commerce  Commission  acted,  the  shipper  could  have 
no  remedy,  and  that,  in  any  event,  the  shipper  would  have 
no  remedy  in  the  State  Court. 

The  Supreme  Court,  in  an  opinion  by  Mr.  Justice 
Brewer,  held  that  the  rights  of  the  shipper  fell  within  the 


—12— 

familiar  rule  that  until  Congress  acts,  a  state  may  make  regu- 
lations of  local  matters  conducive  to  the  welfare  and  conven- 
ience of  its  citizens;  and  that  until  Congress  acted  the  com- 
mon law  of  the  state  applied  in  such  a  case. 

Mr.  Justice  Brewer  said : 

«  #  *  #  -J-JJQ  mere  grant  by  Congress  to  the  commission 
of  certain  national  powers  in  respect  to  interstate  com- 
merce does  not  of  itself  and  in  the  absence  of  action 
by  the  commission  interfere  with  the  authority  of  the 
state  to  make  those  regulations  conducive  to  the  welfare 
and  convenience  of  its  citizens.  Running  through  the 
entire  argument  of  counsel  for  the  Missouri  Pacific  is 
the  thought  that  the  control  of  Congress  over  interstate 
commerce  and  a  delegation  of  that  control  to  a  commission 
necessarily  withdraws  from  the  State  all  power  in  re- 
spect to  regulations  of  a  local  character.  This  proposi- 
tion cannot  be  sustained.  Until  specific  action  by  Con- 
gress or  the  commission  the  control  of  the  State  over 
these  incidental  matters  remains  undisturbed.  *  *  * 
This  common  law  duty  the  State,  in  a  case  like  the 
present,  may,  at  least  in  the  absence  of  Congressional 
action,  compel  a  carrier  to  discharge." 

The  Supreme  Court  has  uniformly  held  that  as  to  mat- 
ters  which  are  national  in  character  and  admit  of  only  one 
uniform  system  of  regulation,  the  power  of  Congress  to  regu- 
late interstate  commerce  is  exclusive;  and  that  the  inaction 
of  Congress  in  such  matters  amounts  to  a  declaration  that 
such  interstate  commerce  shall  be  free  from  regulation  by 
the  State.  On  the  other  hand,  it  has  held,  as  it  does  in  the 
Larabee  Mills  case,  above,  that  as  to  matters  which  are  local 
and  incidental,  the  State  may  make  regulations  conducive  to. 
the  welfare  and  convenience  of  its  citizens. 


—13— 

The  Larabee  Mills  Case  applies  the  same  distinction  in 
determining  what  portion  of  the  common  law  of  the  State 
governs  interstate  commerce.  The  Court,  Mr.  Justice 
Brewer,  at  some  length  explains  this  distinction  and  holds 
that  the  common  law  of  the  state  applied  in  that  case,  be- 
cause the  question  involved  related  simply  to  local  and  inci- 
dental matters  conducive  to  the  welfare  and  convenience  of 
the  citizens  of  the  State.  It  must,  therefore  follow  that  as 
to  matters  which  are  national  in  character  and  admit  of 
only  one  uniform  system  of  regulation,  the  common  law  of 
the  State  cannot  apply,  just  as  the  statute  law  of  the  state 
cannot  apply  in  such  a  case. 

Within  which  class  of  cases  does  the  question  of  the 
validity  of  a  combination  in  restraint  of  interstate  commerce 
fall  ?  The  question  of  the  validity  of  such  a  combination 
affecting  interstate  commerce,  and  existing  and  operating 
throughout  several  states,  is  obviously  national  and  must  be 
determined  by  one  uniform  rule.  If  the  validity  of  such  a 
combination  were  to  be  tested  by  the  common  law  of  the 
state  in  which  the  Federal  Court  sits,  as  questions  of  private 
rights  are,  the  same  combination  would  be  held  legal  in  one 
state  and  illegal  in  the  other.  The  legality  of  a  combination 
in  interstate  commerce  must  therefore  be  determined  by  a 
uniform  rule  of  public  policy  which  cannot  exist  until  Con- 
gress applies  it.  Until  Congress  acts  there  is  no  law  for- 
bidding or  declaring  illegal  combinations  in  restraint  of  inter- 
state commerce. 

The  common  law  which  governs  such  questions  as  are 
local  and  affects  interstate  commerce  only  incidentally  and 
are  conductive  to  the  welfare  and  convenience  of  the  state 
citizens,  is  the  common  law  of  the  state.  It  is  because 
these  rules  of  the  common  law  of  the  state,  are  local  and 


affect  interstate  commerce  incident! y,  just  as  certain  statutes 
of  the  state  do,  that  these  rules  of  the  common  law  are  en- 
forced until  Congress  acts  and  supplies  a  uniform  rule  which 
supersedes  them. 

But  until  Congress  does  act,  the  Federal  Court  in  de- 
ciding such  local  and  in  cidental  questions  applies  the  com- 
mon law  of  the  State,  and  not  a  federal  or  interstate  com- 
mon law. 

Thus  in  Western  Union  Telegraph  Co.  vs.  Call  Pub- 
lishing Co.,  181  U.  S.,  92,  Mr.  Justice  Brewer  quoted  the 
language  of  Mr.  Justice  Matthews  in  Smith  vs.  Alabama, 
U.  S.,  465,  as  follows: 

"The  law  as  applied  (to  interstate  commerce)  is  none 
the  less  the  law  of  that  state.7'  (p.  478). 
Mr.  Justice  Brewer's  comment  on  this  language  is 
"Properly  understood,  no  exceptions  can  be  taken  to 
declarations  of  this  kind.  There  is  no  body  of  federal 
common  law  separate  and  distinct  from  the  common 
law  existing  in  the  several  states,  in  the  sense  that 
there  is  a  body  of  statute  law  enacted  by  Congress  sep- 
arate and  distinct  from  the  body  of  statute  law  enacted 
by  the  several  states.  But  it  is  an  entirely  different 
thing  to  hold  that  there  is  no  common  law  in  force 
generally  throughout  the  United  States,  and  that  the 
countless  multitude  of  interstate  commercial  transactions 
are  subject  to  no  rules  and  burdened  by  no  restrictions 
other  than  those  expressed  in  the  statutes  of  Congress. 
*  *  *  We  are  clearly  of  opinion  that  this  cannot 
be  so,  and  that  the  principles  of  the  common  law  are 
operative  upon  all  interstate  commercial  transactions 
except  so  far  as  they  are  modified  by  Congressional  en- 
actment." 


—15— 

In  Walker  vs.  Globe  Newspaper  Co.,  140  Fed.,  305, 
306  (G.  C.  A.  First  Circuit,  1905)  Circuit  Judge  Putnam 
said  as  to  a  common  law  governing  interstate  commerce : 

"As  required  by  the  various  provisions  of  the  re- 
vised statutes  which,  so  far  as  rights  are  concerned, 
adopt  the  statutory  or  common  law  of  the  state,  where 
the  cause  of  action  arose,  *  *  *  it  is  the  laws  of 
those  states  which  we  are  to  ascertain." 

In  a  later  decision  of  the  Supreme  Court — Kansas  vs. 

Colorado,  206   U.   S.,   46,   97,   the  question  was   as  to  the 

relative  riparian  rights  of  two  states  in  an  interstate  stream. 

Mr.  Justice  Brewer  reviewed  the  Western  Union  Telegraph 

Case,  and  added: 

the  question  of  the  extent  and  the  limitations 
of  the  rights  of  the  two  States  becomes  a  matter  of 
justifiable  dispute  between  them,  and  this  court  is 
called  upon  to  settle  that  dispute  in  such  a  way  as  will 
recognize  the  equal  rights  of  both  and  at  the  same  time 
establish  justice  between  them.  In  other  words,  through 
these  successive  disputes  and  decisions  this  court  is 
practically  building  up  what  may  not  improperly  be 
called  interstate  common  law." 

As  Mr.  Justice  Brewer  said,  the  rules  which  the  Su- 
preme Court  applies  in  deciding  disputes  between  sovereign 
states  are  really  the  rules  of  international  law. 

Furthermore  the  Constitution  confers  upon  the  Supreme 
Court  jurisdiction  to  determine  controversies  between  states, 
just  as  jurisdiction  is  conferred  to  determine  controversies 
between  citizens  of  different  states. 


-16— 


Authorities  continued  from  p.  232  of  brief. 

In  Smith  vs.  Alabama,  124  U.  S.,  464,  477,  479.  A 
statute  of  Alabama  requiring  locomotive  engineers  to  obtain 
a  license  from  the  State  authorities  was  held  not  void  as  a 
regulation  of  interstate  commerce. 

Mr.  Justice  Mathews  said: 

"But  for  the  provisions  on  the  subject  found  in  the 
local  law  of  each  State  there  would  be  no  legal  obliga- 
tion on  the  part  of  the  carrier,  whether  ex  contraciu  01- 
ex  delicto,  to  those  who  employ  him;  or  if  the  local  law 
is  held  not  to  apply  where  the  carrier  is  engaged  in  for- 
eign or  interstate  commerce,  then,  in  the  absence  of  laws 
passed  by  Congress,  or  presumed  to  be  adopted  by  it, 
there  can  be  no  rule  of  decision  based  upon  rights  and 
duties  supposed  to  grow  out  of  the  relation  of  such  car- 
riers to  the  public  or  to  individuals.  In  other  words,  if 
the  law  of  the  particular  States  does  not  govern  that  re- 
lation, and  prescribe  the  rights  and  duties  which  it  im- 
plies, then  there  is  and  can  be  no  law  that  does  until  Con- 
gress expressly  supplies  it,  or  is  held  by  implication  to 
have  supplied  it,  in  cases  within  its  jurisdiction  over  for- 
eign and  interstate  commerce." 
*#-X-#-*#-*-K# 

"Wheaton  vs.  Peters,  8  Pet,  591.  A  determina- 
tion in  a  given  case  of  what  that  law  is  may  be  different 
in  a  court  of  the  United  States  from  that  which  pre- 
vails in  the  judicial  tribunals  of  a  particular  State.  This 
arises  from  the  circumstance  that  the  Courts  of  the 
United  States,  in  cases  within  their  jurisdiction,  where 
they  are  called  upon  to  administer  the  law  of  the  State 
in  which  they  sit  or  by  which  the  transaction  is  gov- 
erned, exercise  an  independent  though  concurrent  jur- 
isdiction, and  are  required  to  ascertain  and  declare  the 
law  according  to  their  own  judgment.  This  is  illus- 


—17— 

trated  in  the  case  of  Railroad  Co.  vs.  Lockwood,  17  Wall, 
357,  where  the  common  law  prevailing  in  the  State  of 
New  York,  in  reference  to  the  liability  of  common  car- 
riers for  negligence,  received  a  different  interpretation 
from  that  placed  upon  it  by  the  judicial  tribunals  of  the 
State ;  but  the  law  as  applied  was  none  the  less  the  law 
of  that  State." 

In  United  States  vs.  Hudson,  7  Cranch,  32,  the  Court 
held  that  the  Federal  Courts  have  no  common  law  jurisdic- 
tion in  criminal  cases,  and  sustained  a  demurrer  to  an  indict- 
ment for  libel  on  the  President  and  Congress. 

United  States  vs.  Britton,  108  U.  S.,  199,  206: 

"There  are  no  common  law  offenses  against  the 
United  States:  United  States  vs.  Hudson,  7  Cranch, 
32 ;  United  States  vs.  Coolidge,  1  Wheat,  415." 

Manchester  vs.  Massachusetts,  139  U.  S.,  240,  262 : 

"The  Courts  of  the  United  States,  merely  by  virtue 
of  this  grant  of  judicial  power,  and  in  the  absence  of 
legislation  by  Congress,  have  no  criminal  jurisdiction 
whatever.  The  criminal  jurisdiction  of  the  courts  of 
the  United  States  is  wholly  derived  from  the  statutes 
of  the  United  States:  Butler  vs.  Boston  &  Savannah 
Steamship  Co.,  130  U.  S.,  527;  The  Belfast,  7  Wall, 
624;  The  Eagle,  8  Wall.,  15;  Leon  vs.  Galceran,  11 
Wall.,  185;  Steamboat  Co.  vs.  Chase,  16  Wall,  522;  S. 
C.  9  E.  L,  419;  Schoonmaker  vs.  Gilmore,  102  U.  S., 
118;  Insurance  Co.  vs.  Dunham,  11  Wall.,  1;  Jones  vs. 
United  States,  137  U.  S.,  202,  211." 

United  States  vs.  Eaton,  144  U.  S.,  677,  687: 

alt  is  well  settled  that  there  are  no  common  law  of- 
fenses against  the  United  States:  United  States  vs. 


—18— 

Hudson,  1  Cranch,  32;  United  States  vs.  Coolidge,  1 
Wheat,,  415;  United  States  vs.  Britton,  108  U.  S.,  199, 
206 ;  Manchester  vs.  Massachusetts,  139  U.  S.,  240,  262, 
263,  and  cases  there  cited." 

Pettibone  vs.  United  States,  148  II.  S.,  197,  203.     Chief 
Justice  Fuller: 

"The  Courts  of  the  United  States  have  no  jurisdic- 
tion over  offenses  not  made  punishable  by  the  Constitu- 
tion, laws  or  treaties  of  the  United  States,  but  they  re- 
sort to  the  common  law  for  the  definition  of  terms  by 
which  offenses  are  designated." 

Cooky's  Const.  Lim.,  page  47: 

"And  although  the  Courts  of  the  United  States  ad- 
minister the  common  law  in  many  cases  they  can  recog- 
nize as  offenses  against  the  nation  ONLY  those  acts 
which  are  made  criminal  and  their  punishment  provided 
for  by  acts  of  Congress." 

In  Willamette  Iron  Bridge  Co.  vs.  Hatch,  125  U.  S., 
1,  8,  Mr.  Justice  Bradley  said: 

"The  power  of  Congress  to  pass  laws  for  the  regu- 
lation of  the  navigation  of  public  rivers,  and  to  prevent 
any  and  all  obstructions  therein,  is  not  questioned.  But 
until  it  does  pass  smne  such  law,  there  is  no  common  law 
of  the  United  States  which  prohibits  obstructions  and 
nuisances  in  navigable  rivers,  unless  it  be  the  maritime 
law,  administered  by  the  courts  of  admiralty  and  mari- 
time jurisdiction.  ]STo  precedent,  however,  exists  for  the 
enforcement  of  any  such  law;  and  if  such  law  could  be 
enforced  (a  point  which  we  do  not  undertake  to  decide) 
it  would  not  avail  to  sustain  the  bill  in  equity  filed  in 
the  original  cases.  There  must  be  a  direct  statute  of  the 


—19— 


United  States  in  order  to  bring  within  the  scope  of  its 
laws,  as  administered  by  the  Courts  of  law  and  equity, 
obstructions  and  nuisances  in  navigable  streams  within 
the  States.  Such  obstructions  and  nuisances  are  offenses 
against  the  laws  of  the  States  within  which  the  naviga- 
ble waters  lie,  and  may  be  indicted  or  prohibited  as  such ; 
but  they  are  not  offenses  against  United  States  laws 
which  do  not  exist ;  and  none  such  exist  except  what  are 
to  be  found  on  the  statute  book.  Of  course,  where  the 
litigant  parties  are  citizens  of  different  States,  the  Cir- 
cuit Courts  of  the  United  States  may  take  jurisdiction 
on  that  ground,  but  on  no  other.  This  is  the  result  of  so 
many  cases,  and  expressions  of  opinion  by  this  Court, 
that  it  is  almost  superfluous  to  cite  authorities  on  the 
subject.  We  refer  to  the  following  by  way  of  illustra- 
tion: Willson  vs.  Black  Bird  Creek  Co.,  2  Pet,,  245; 
Pollard's  Lessee  vs.  Hagan,  3  How.,  212,  229 ;  Passaic 
Bridges,  3  Wall.,  782  App. ;  Oilman  vs.  Philadelphia,  3 
Wall.,  713,  724;  Pound  vs.  Turck,  95  U.  S.,  459;  Esca- 
naba  Co.  vs.  Chicago,  107  U.  S.,  678;  Cardwell  vs. 
American  Bridge  Company,  113  IT.  S.,  205 ;  Hamilton 
vs.  Vzcksburg,  etc.,  Railroad  Co.,  119  U.  S.,  280;  II use 
vs.  Glover,  119  U.  S.,  543;  Sands  vs.  Manistee  River 
Imp.  Co.,  123  U.  S.,  288;  Transportation  Co.  vs.  Par- 
kersburg,  107  U.  S.,  691,  700.  The  usual  case,  of 
course,  is  that  in  which  the  acts  complained  of  are  clear- 
ly supported  by  a  state  statute ;  but  that  really  makes  no 
difference.  Whether  they  are  conformable,  or  not  con- 
formable, to  the  State  law  relied  on,  is  a  State  question, 
not  a  Federal  one.  The  failure  of  State  functionaries 
to  prosecute  for  breaches  of  the  State  law  does  not  con- 
fer power  upon  United  States  functionaries  to  prosecute 
under  a  United  States  law,  when  there  is  no  such  law  in 
existence." 


—20— 

STATE  CASES  ON  TRUST  AGREEMENT  OF  1882. 

Authorities  continued  from  p.  238  of  brief. 

Our  case  differs  widely  from  the  cases  of  the  Glucose 
Company  (55  N.  E.  Rep.,  577),  the  Chicago  Trust  case  (130 
111.,  268),  the  Sugar  Refining  case  (54  Hun.,  N.  Y.),  the 
Distilling  &  Cattle  Feeding  case  (156  Ills.,  458),  the 
Whiskey  Trust  (29  Neb.,  700),  and  all  that  class  of  cases 
which  the  Government  cites. 


(1)  In  all  those  cases  there  was  a  combination  be- 
tween independent  competing  corporations  in  the  same  line 
of  business  by  which  the  competition  was  to  cease,  by  which 
a  committee  or  like  power  was  to  be  appointed  to  fix  prices 
for  all,  and  by  which  a  committee  or  like  power  was  to  regu- 
late the  production  of  each.    In  this  way,  competition  ceased, 
prices  were  arbitrary  and  the  production  was  the  same,  and 
the  public  suffered. 

(2)  In  some  of  those  cases  as   in  the  Chicago   Gas 
case,  it  was  the  attempted  combination  of  independent  gas 
companies,  each  having  a  public  aspect,  i.  e.,  the  service  to 
the  public,  and  each  having  public  grants  of  power  which 
put  them  under  peculiar  duties  to  the  public,  and  where  the 
least  combination  between  them  by  which  competition  would 
be  restricted,  the  power  to  raise  prices  given,  or  the  produc- 
tion controlled,  is  forbidden  by  the  law  (the  Baltimore  Gas 
case,  130  U.  S.,  396). 

(3)  In  each  one  of  those  cases,  including  now  the  case 
of  the  State  of  Ohio  against  the  Standard  Oil  Company  (49 
Ohio  State,  137),  the  court  found  as  a  fact  that  the  purpose 


—21— 


of  the  combination  was  to  prevent   competition  and  gain  a 
monopoly  by  the  illegal  means  of  preventing  competition. 


Thus  in  the  Standard  Oil  Trust  case,  the  court  said  inter 
alia  (49  Ohio  State,  137)  that  the  Standard  Oil  Trust  agree- 
ment of  1882  was 

*  organized  for  a  purpose  contrary  to 
the  policy  of  our  laws.  Its  object  was  to  establish  a  vir- 
tual monopoly  of  the  business  of  producing  petroleum, 
and  of  manufacturing,  refining  and  dealing  in  it  and  all 
its  products,  throughout  the  entire  country,  and  by  which 
it  might  not  merely  control  the  production,  but  the 
prices  at  its  pleasure.  All  such  associations  are  contrary 
to  the  policy  of  our  state,  and  void." 

In  the  North  River  Sugar  Riming  Case  (54th  Hun., 
354)  the  court  said  that  the  purpose  of  the  combination  in  the 
case  was  to  restrict  competition  and  obtain  a  monopoly. 

In  the  Whiskey  Trust  Case,  29  Neb.,  TOO,  719,  the  Court 
said  that  the  distillers  had  formed  a  pool  to  prevent  over- 
production and  prevent  lower  prices,  and  that 

"the  findings  in  this  case,  to  which  no  objection  is  made, 
merely  show  that  the  object  of  the  "DistilliK^  Company  in 
entering  into  the  illegal  combination  was  to  destroy  com- 
petition and  create  a  monopoly  *  *  *." 

In  the  Distilling  and  Cattle  Feeding  Company  Case,, 
156  III.,  458,  among  other  things,  the  court  held  that  (486)  : 
"There  can  be  no  doubt,  we  think,  that  the  Dis- 
tillers and  Cattle  Feeders'  Trust,  which  preceded  the  in- 
corporation of  the  defendant,  was  an  organization  which 
contravened  well  established  principles  of  public  policy, 


—22— 

and  that  it  was  therefore  illegal.  No  one  who  intelli- 
gently considered  the  scheme  of  this  trust  as  de- 
tailed in  the  information  can  for  a  moment  doubt 
that  it  was  designed  to  be,  and  was  in  fact  a 
combination  in  restraint  of  trade,  and  that  it  was  or- 
ganized for  the  purpose  of  getting  control  of  the  manu- 
facture and  sale  of  all  distillery  products,  so  as  to  stifle 
competition,  and  to  be  able  to  dictate  the  amount  to  be 
manufactured  and  the  prices  at  which  the  same  should 
be  sold,  and  thus  to  create,  or  tend  to  create  a  virtual 
monopoly  in  the  manufacture  and  sale  of  products  of 
that  character. 


In  the  Chicago  Gas  Trust  Case,  130  111.,  268,  there  were 
four  separate  and  independent  gas  companies  doing  business 
in  the  City  of  Chicago,  and  a  new  corporation  was  formed 
for  the  express  purpose  of  controlling  all  four  of  those,  act- 
ing in  the  common  interest  of  one  company,  and  it  was  held 
to  be  illegal.  (292,  293). 

"The  control  of  the  four  companies  by  the  appellee, 
— an  outside  and  independent  corporation, — suppresses* 
competition  between  them  and  destroys  their  diversity 
of  interest  and  all  motive  for  competition.  There  is  thus 
built  up  a  virtual  monopoly  in  the  manufacture  and  sale 
of  gas.  *  *  *  Whatever  tends  to  prevent  competi- 
tion between  those  engaged  in  a  public  employment  or 
business  impressed  with  a  public  character,  is  opposed  to 
public  policy,  and,  therefore,  unlawful.  Whatever  tends 
to  create  a  monopoly  is  unlawful  as  being  contrary  to 
public  policy." 


In  the  Glucose  case,  182  111.,  551,  55  K  E.  Rep.,  577, 
stockholders  of  many  independent  and  competing  corporations 
had  put  their  stock  into  the  hands  of  a  certain  trust  for  the 


—23— 

purpose  of  controlling  prices,  limiting  production,  and  sup- 
pressing competition;  and  the  court  said:     (663) 

"The  transfer  of  its  property,  made  by  the  Ameri- 
can Glucose  Company,  was  a  transfer  to  a  corporation, 
created  for  the  express  purpose  of  taking  its  property, 
and  the  property  of  other  corporations,  so  as  to  use 
them  in  the  suppression  of  competition,  and  in  the  crea- 
tion of  a  monopoly  in  the  manufacture  of  glucose  and 
grape  sugar  and  their  products  and  hy-products.  The 
whole  scheme,  as  devised  and  consummated,  was  a  fraud, 
not  only  on  the  public,  but  upon  the  dissenting  stock- 
holder filing  this  bill." 


In  the  case  of  Dunbar  vs.  American  Telephone  Com- 
pany, 238  111.,  456,  79  ft" .  E.,  423,  426,  in  the  Supremf  Court 
of  Illinois,  the  court  said: 

it  sufficiently  shows,  against  a  general 
demurrer,  that  the  American  Company,  through  the  de- 
fendant Barton  and  others,  became  the  purchaser  of  the 
shares  of  stock  with  the  unlawful  purpose  and  intention 
of  putting  the  Kellogg  Company  out  of  business,  or  so 
using  and  controlling  it  as  to  prevent  rivalry  in  business 
and  creating  a  monopoly,  arid  it  called  for  an  answer 
from  defendants.  If  such  was  the  purpose  and  object 
of  the  purchase,  the  decisions  of  this  court  are  full  to  the 
effect  that  the  law  will  not  lend  its  aid  to  accomplish 
the  object.77 


In  the  National  Lead  Trust  Case,  80  Mo.  Appeal,  247, 
266,  the  court  held  that  it 

was  an  unlawful  combination,  both  in  pur- 
pose and  fact,  is  sufficiently  established  by  the  nature  of 
the  agreement  under  which  it  was  created  and  the 


—24— 

methods  and  practices  resorted  to  in- furtherance  of  that 
agreement.  The  agreement  in  question  can  only  be  con- 
strued as  a  contract  to  suppress  competition,  fix  the  price 
of  commodities,  and  limit  their  production,  and  to  re- 
strain trade.7'" 


(4)  In  each  of  those  cases  it  was  the  combination  of 
pre-existing,  independent  corporations,  and  in  no  case  was 
there  any  pretense  that  the  trust  agreement  was  used  merely 
for  the  purpose  of  the  more  easily  handling  an  already 
pre-existing,  non-competing  unit  or  business  which  had  been 
fostered  and  nurtured  from  its  beginning,  and  where  the 
trust  agreement  was  used  merely  for  convenience  in  the  hand- 
ling of  property  already  owned.  In  our  case  it  had  no  pur- 
pose of  preventing  competition  or  fixing  prices  or  controlling 
production.  It  was  simply  and  only  a  convenient  method  of 
holding  properties  in  the  evolution  and  development  of  a 
legitimate,  lawful  business  in  the  manufacture,  production, 
transportation  and  sale  of  crude  oil. 


TRUST  AGREEMENT  VALID. 

As  the  Trust  Agreement  of  1882  was  not  void  under  any 
Federal  common  law,  the  continuance  of  it  until  1899  (which 
we  deny),  was  not  illegal;  and  when,  in  1899,  the  joint  own- 
ers of  all  these  properties  saw  fit  to  convey  them  to  a  corpora- 
tion of  the  State  of  New  Jersey,  and  in  this  manner  to  con- 
trol and  use  and  regulate  them,  this  was  not  of  itself  a  re- 
straint of  trade  or  a  monopoly  under  the  Sherman  Act.  The 
case  bears  no  relation  whatever  to  the  Northern  Securities 
Case  which,  in  brief,  was  that  certain  stockholders  of  com- 
peting railroads,  who  could  not  unite  their  stock  to  prevent 
competition  between  the  roads,  obtained  a  charter  in  New 


—25— 

Jersey  to  authorize  them  so  to  do ;  and,  of  course,  the  courts 
held  that  these  people  could  not  cite  a  charter  of  New  Jersey 
as  authorizing  them  to  violate  the  laws  of  the  United  States, 
and  especially  the  Sherman  Act. 

But  in  our  case,  the  properties  that  were  conveyed  were 
non-competitive.  They  were  properties  jointly  used  and  law- 
fully used  in  a  lawful  business.  The  owners  of  the  property 
used  the  New  Jersey  corporation  as  a  method  or  mode  of 
holding  and  controlling  and  using  the  properties.  This  hold- 
ing and  owning  by  the  New  Jersey  corporation  did  not  give 
to  the  owners  of  the  property  any  additional  rights  as  was 
claimed  in  the  Northern  Securities  Case.  Indeed  the  Stand- 
ard Oil  Company  of  New  Jersey  acquired  its  rights  from 
the  individual  owners  of  these  properties,  and  these  indi- 
vidual owners  did  not,  by  the  conveyance  to  the  New  Jersey 
corporation,  acquire  any  additional  rights  except  as  to  the 
methods  of  holding  and  using  and  managing  the  property. 

Here  again  the  rights  of  the  citizens  of  the  United  States 
and  the  method  or  the  manner  in  which  they  may  jointly  hold 
and  use  property  are  asserted.  If  the  laws  of  New  Jersey 
authorize  them  through  the  method  of  a  corporation  to  so 
hold  and  use  these  non -competitive  groups  of  property,  it  is 
inconceivable  that  the  conveyance  of  the  property  to  the 
New  Jersey  corporation  made  a  combination  in  restraint  of 
trade,  or  as  tending  to  a  monopoly  under  the  Sherman  Act. 
If  the  joint  ownership  itself  of  the  real  estate  and  the  other 
property  and  the  use  of  them  jointly  by  the  individuals  was 
not  of  itself  a  restraint  of  trade  and  as  tending  to  a  monopoly 
in  violation  of  the  Sherman  Act,  if  these  owners  had  still 
continued  to  hold  the  property  in  their  own  names,  surely 
their  conveyance  to  the  New  Jersey  corporation  did  not  make 
it  a  combination  in  restraint  of  trade  or  a  monopoly. 


—26- 


(i)  Was  there  a  Federal  common  law  which  de- 
nounced this  Trust  Agreement  as  in  restraint  of  trade 
and  as  tending  to  a  monopoly? 

We  answer  no;  and  while  this  is  more  fully  treated  in 
another  portion  of  this  brief,  it  may  not  be  out  of  place  here 
to  briefly  state  the  reasoning. 

Whether  or  not  there  was  in  1882  a  federal  common  law 
in  existence  as  to  interstate  trade  under  the  decision  of  the 
Western  Union  Telegraph  and  other  cases  contrasted  with 
the  case  of  the  Willamette  Bridge  and  the  subsequent  case  of 
North  Shore  Co.  vs.  Nicomen  Boom  Co.,  212  U.  S.,  412,  may 
be  a  matter  of  grave  doubt  so  far  as  the  exact  question  in  this 
case  is  concerned;  but  certain  it  is  that  at  that  time  there 
was  no  Federal  common  law  which  did  or  could  regulate  the 
acquisition  and  the  use  of  manufacturing  or  producing  prop- 
erties in  the  States  of  Ohio,  Pennsylvania  or  other  States; 
and  this  because  these  manufacturing  or  producing  properties 
never  entered  into  the  channel  of  interstate  trade,  and  were 
not  within  the  jurisdiction  of  Congress  as  was  fully  deter- 
mined in  the  case  of  Kidd  vs.  Pearson  and  the  Knight  & 
Company  case. 

There  could  be,  then,  no  federal  common  law  which 
was  broader  than  Congressional  power;  that  is,  the  courts 
could  not  declare  the  existence  of  a  federal  common  law 
which  Congress  itself  could  not  enact  by  statute,  and  Con- 
gress itself  could  not  enact  by  statute,  regulations  with  refer- 
ence to  the  acquisition  and  use  of  properties  in  the  different 
States. 


(2)     Assuming  there  was  such  a  federal  common 
law  which  the  agreement  violated — What  then? 

In  this  case,  these  properties  and  the  rights  of  the  trus- 
tees to  hold  them  are  not  directly  involved,  because  the  only 
thing  that  has  entered  into  interstate  commerce  is  the  crude 
and  refined  oil;  the  refineries  and  producing  oil  wells  and 
pipe  lines  have  never  entered  into  interstate  commerce.  They 
are  all  state  constructions  and  owned  under  the  laws  of  the 
different  states  in  which  they  are  located.  Now  admitting, 
arguendo,  that  the  Trust  Agreement  of  1882  was  against  the 
policy  of  the  State  of  Ohio,  Ohio  never  did  declare  that  the 
title  to  the  property  was  in  any  way  vitiated  or  taken  away 
from  the  owners  of  the  property  by  this  conveyance  in  1882. 
There  never  has  been  a  forfeiture  declared  or  even  suggested. 
All  that  enters  into  interstate  trade  is  either  the  crude  oil 
produced  at  the  wells  or  the  refined  oil  and  its  products, 
which,  in  part  and  in  great  part,  depends  upon  the  use  of  the 
producing  oil  wells  and  the  refineries.  JSTo  one  supposes,  even 
if  A  B  owns  the  title  to  a  refinery  or  a  steel  mill  or  other 
manufacturing  property,  that  because  his  title  might  be 
defective  to  the  real  estate  that  he  did  not  have  title  to  the 
things  produced  by  the  use  of  it ;  as,  for  example,  refined  oil 
and  its  products  and  steel  rails,  etc.  Especially  is  this  true 
as  to  the  federal  law.  The  United  States  does  not  examine 
the  title  and  the  methods  by  which  the  property  put  into  in- 
terstate channels  is  acquired.  It  does  not  demand  of  the  per- 
son who  is  engaged  in  interstate  trade  that  he  show  the  ab- 
stract of  title  to  the  things  which  he  is  transferring.  Indeed, 
it  does  not  concern  itself  with  the  title  at  all,  and  the  regu- 
lations which  Congress  may  make  as  to  interstate  trade  do 
not,  as  the  Knight  &  Company  case  fully  show,  extend  to  the 
question  of  the  acquisition  and  ownership  of  the  real  estate 
and  property  located  in  the  states,  because  that  is  not  part  of 
commerce  between  the  states. 


—28— 


When  the  trust  agreement  was  dissolved  in  1892, 
there  was  no  separate  conveyance  by  the  Trustees  to: 
any  one  of  the  cestuis  que  trustent  of  any  particular 
thing;  i.  e.,  particular  piece  of  property.  All  of  the 
stockholders  or  rather  the  cestuis  que  trustent  under 
the  trust  agreement  of  1882  still  jointly  owned,  as  they 
did  before,  all  the  property;  and  it  was  this  jointly 
owned  property  which  was  conveyed  in  1899  to  the* 
Standard  Oil  Company  of  New  Jersey.  This  property 
was  not  competitive  before  the  dissolution,  and  the 
proof  is  overwhelming  that  there  was  no  change  in  the 
method  of  the  management  of  the  property,  and  this  the 
petition  in  equity  asserts  and  re-asserts. 

Thus  the  petition  in  this  case  alleges  (p.  66)  that  the 
liquidating  trustees  named  in  the  resolution  of  1892  dis- 
solving the  trust  were  the  same  as  the  trustees  under  the 
Agreement  of  1882,  and  that,  with  the  exception  of  $1,579,- 
400  worth  of  property,  the  trustees,  after  the  dissolution  in 
1892,  continued  to  unlawfully  hold  and  control  all  of  said 
property,  and  that  none  of  it  was  returned  to  the  original 
owners;  and  that  (p. 69) 

usaid  individual  defendants  continued  their  control  and 
joint  ownership  and  the  conspiracy  to  control  the  busi- 
ness of  said  separate  corporations." 

And  on  page  68,  the  dissolution  is  said  to  be  a  pretended 
dissolution;  and  on  page  69,  is  the  following  averment: 

"That  during  the  said  time  from  1892  down  to 
January,  1899,  and  notwithstanding  the  said  decision 
declaring  the  said  trust  agreement  void  and  ousting  the 
Standard  Oil  Company  of  Ohio  from  the  right  to  make 
said  agreement  and  to  perform  the  same,  and  notwith- 
standing the  pretended  dissolution  of  said  trust,  the  indi- 


—29— 

vidual  defendants  in  this  action,  who  were  liquidating 
trustees,  did  continue  to  manage  the  affairs  of  all  said 
separate  corporations  so  engaged  in  said  business  in  the 
same  manner  as  they  had  theretofore,  under  and  by  vir- 
tue of  the  terms  of  said  trust  agreement,  and  in  violation 
of  law  and  continued  to  elect  and  did  elect  and  desig- 
nate the  directors,  managers,  and  officers  of  all  of  said 
corporations,  for  the  purposes  and  with  the  effect  of  sup- 
pressing and  restraining  commerce,"  etc. 
Again  on  page  70,  the  petition  alleges  that  in  1899 
"in  continuation" 

of  the  original  conspiracy  and  for  the  purpose  of  making  that 
more  effective,  in  the  month  of  January  1899  the  individual 
defendants  caused  the  charter  of  the  New  Jersey  corporation 
to  be  amended  and  (p.  72), 

"The  object  of  forming  said  corporation  was  to 
acquire  the  stock  and  control  of  each  and  all  of  said 
corporations  and  other  corporations  engaged  in  like  busi- 
ness, and  for  the  purpose  of  operating  and  controlling 
said  corporation  and  other  corporations  in  the  same  man- 
ner as  has  been  done  by  the  individual  defendants 
through  said  trust  agreement." 

The  allegation  then  follows  that  the  individual  defend- 
ants controlled  the  New  Jersey  corporation  in  the  same  man- 
ner that  they  did  under  the  trust  agreement  of  1882,  and  used 
the  New  Jersey  corporation  as  one  of  the  means  and  methods 
of  carrying  out  the  original  conspiracy.  On  pages  78  and 
79  it  was  distinctly  alleged  that  the  Standard  Oil  Company  of 
New  Jersey  was  engaged  in  producing,  purchasing  and  trans- 
porting petroleum  in  different  ways  and  selling  it  (p.  79)  : 

"The  said  individual  defendants,  through  the  said 
Standard  Oil  Trust  and  Standard  Oil  Company  and 
their  said  various  subsidiary  corporations,  have,  there- 
fore, during  each  and  all  of  the  years  since  the  organiza- 


—30— 

tion  of  said  Standard  Oil  Trust  in  1882  and  of  said 
Standard  Oil  Company  in  1899,  been  engaged  in  inter- 
state commerce." 

For  the  Government  now  to  claim  that  there  was  a  break 
in  this  continuity  of  ownership  and  control,  and  that  after  the 
dissolution  of  1892  there  was  a  distinct  and  independent  own- 
ership of  the  different  companies,  and  that  the  different  com- 
panies became  competitive  to  each  other,  is  utterly  inconsis- 
tent with  their  own  petition  and  their  allegation  in  the  peti- 
tion as  to  what  their  case  is. 


The  testimony  of  Mr.  John  D.  Rockefeller  (Vol.  16,  pp. 
3190-3193)  is  attempted  to  be  used  to  prove  that  (which 
proof  would  directly  contradict  the  allegations  of  the  Govern- 
ment in  its  petition)  after  the  dissolution  the  companies  were 
independent  and  competing;  but  if  the  testimony  of  Mr. 
Rockefeller  is  read  as  a  whole,  and  especially  his  testimony 
on  page  3191,  etc.,  down  to  page  3193,  it  will  be  seen  that 
what  he  testified  to  was  what  was  a  fact,  and  that  was  that 
while  all  these  cestuis  que  trustent,  under  the  agreement  of 
1889,  were  still  the  joint  owners  of  all  these  different  prop- 
erties (p.  3193)  yet,  as  a  fact  in  one  sense,  each  one  of  the 
different  corporations  in  each  one  of  the  different  States 
did  do  its  separate  and  independent  business,  as  for  example, 
the  refining  of  oil  and  the  sale  of  its  own  product. 

Thus  Mr.  Rockefeller  testified  (p.  3193),  as  follows: 

"I  suppose  that  as  a  matter  of  fact  these  companies, 
all  being  owned  by  the  same  people,  would  not  be  manag- 
ing their  separate  businesses,  except  in  the  way  that 
would  be  most  productive  for  all  the  separate  businesses. 
*  *  Well,  each  company  does  continue  to  manage 
its  own  business  to-day,  as  I  understand  it.  *  *  If 


—31— 

a  company  is  organized  under  the  laws  of  the  State  of 
Ohio,  it  is  an  independent  corporation;  and  that  if  it  is 
organized  to  conduct  that  business  that  is  its  function, 
that  is  what  it  is  expected  to  do." 
Again,  on  p.  3194,  he  said : 

"The  control  of  those  different  companies  in  each 
case  was,  as  I  have  stated,  hy  the  stock  holdings,  and 
those  companies  were  then,  as  now,  in  this  common  own- 
ership.    *     *     * 
Q.     After  the  dissolution  the  ownership  was  not  the 

same  as  before  the  dissolution,  was  it? 
A.  There  was  no  change  of  interest  of  the  parties  con- 
cerned ;  that  is,  every  man  had  just  the  precise  pro- 
portion of  all  this  business  that  he  had  had  before, 
and  so  fast  as  these  trust  certificates  were  cancelled, 
then,  instead  of  having  one  certificate  to  represent 
that  same  precise  interest,  he  had  an  interest  in 
each  one  of  those  companies." 

It  is  true,  as  Mr.  Rockefeller  testified,  that  there  never 
was  any  agreement  between  the  joint  owners  of  the  property; 
that,  for  example,  the  Standard  Oil  Company  of  Ohio  should 
not  sell  its  oil  within  a  territory,  say  of  the  Standard  Oil 
Company  of  Kentucky,  and  in  that  sense  it  is  still  true,  but 
economic  laws  really  govern  that  and  define  the  competitive 
territory  for  each  corporation. 

This  attempt,  then,  to  vary  the  charges  in  the  bill  and 
to  attempt  by  evident  misapprehension  of  Mr.  Rockefeller's 
testimony  to  prove  the  existence  of  distinct  and  independent 
and  competing  properties  after  1892  must  utterly  fail. 


—32— 


COMPETITION. 

Mogul  Steamship  Co.  vs.  McGregor,  Gow  &  Co. 

The  number  of  ships  carrying  tea  from  China  to  Lon- 
don was  greater  than  necessary  for  the  cargoes  available. 
Certain  of  the  ship  owners,  the  defendants,  formed  an  asso- 
ciation, from  which  plaintiffs  were  excluded,  the  purpose  of 
which  was  to  drive  plaintiffs  from  the  field,  obtain  a  monopoly 
and  maintain  rates. 

They  agreed  to: 

FIEST.     Divide  the  business  and  regulate  rates. 

SECOND.  Offer  a  special  rebate  of  five  per  cent. 
(5%)  to  shippers  who  consigned  their  tea  exclusively  in 
defendant's  vessels. 

THIRD.  Threaten  to  dismiss  their  agents  in  China 
if  they  acted  also  in  the  interest  of  the  plaintiffs. 

FOURTH.  Send  special  ships  to  underbid  any  ves- 
sels which  plaintiffs  might  send. 

Defendants  reduced  rates  so  low  that  plaintiffs  were 
obliged  to  carry  at  unremunerative  rates  in  order  to  obtain 
a  homeward  cargo  for  the  ships  which  they  had  sent. 

Plaintiffs  brought  an  action  to  recover  damages — which 
was  tried  without  a  jury  before  Lord  Coleridge,  who  gave 
judgment  for  the  defendant. 

L.  R.,  21,  Q.  B.  544. 

This  judgment  was  affirmed  by  the  Court  of  Appeals  in 
L.  R,  23,  Q.  B.,  598. 

In  the  opinion  of  the  Court  of  Appeals,  Lord  Justice 
Bowen  said  (617-618)  : 

"What,  then,  are  the  limitations  which  the 
law  imposes  on  a  trader  in  the  conduct  of  his 


business  as  between  himself  and  other  traders?  There 
seem  to  be  no  burdens  or  restrictions  in  law  upon  a 
trader  which  arise  merely  from  the  fact  that  he  is  a 
trader,  and  which  are  not  equally  laid  on  all  other  sub- 
jects of  the  Crown.  His  right  to  trade  freely  is  a  right 
which  the  law  recognizes  and  encourages,  but  it  is  one 
which  places  him  at  no  special  disadvantage  as  com- 
pared with  others.  ~No  man,  whether  trader  or  not,  can, 
however,  justify  damaging  another  in  his  commercial 
business  by  fraud  or  misrepresentation.  Intimidation, 
obstruction  and  molestation  are  forbidden;  so  is  the  in- 
tentional procurement  of  a  violation  of  individual  rights, 
contractual  or  other,  assuming  always  that  there  is  no 
just  cause  for  it.  The  intentional  driving  away  of  cus- 
tomers by  show  of  violence:  Tarleton  vs.  M'Gawley; 
the  obstruction  of  actors  on  the  stage  by  preconcerted 
hissing:  Clifford  vs.  Brandon,  Gregory  vs.  Brunswick; 
the  disturbance  of  wild  fowl  in  decoys  by  the  firing  of 
guns:  Carrington  vs.  Taylor  and  Keeble  vs.  Hickerin- 
gill;  the  impeding  or  threatening  servants  or  workmen: 
Garret  vs.  Taylor;  the  inducing  persons  under  personal 
contracts  to  break  their  contracts:  Bowen  vs.  Hall, 
Lumley  vs.  Gye,  all  are  instances  of  such  forbidden  acts. 
But  the  defendants  have  been  guilty  of  none  of  these 
acts.  They  have  done  nothing  more  against  the  plain- 
tiffs than  pursue  to  the  bitter  end  a  war  of  competition 
waged  in  the  interest  of  their  own  trade.  To  the  argu- 
ment that  a  competition  so  pursued  ceases  to  have  a  just 
cause  or  excuse  when  there  is  ill  will  or  a  personal  in- 
tention to  harm,  it  is  sufficient  to  reply  (as  I  have  already 
pointed  out)  that  there  was  here  no  personal  intention 
to  do  any  other  or  greater  harm  to  the  plaintiffs  than 
such  as  was  necessarily  involved  in  the  desire  to  attract 
to  the  defendants7  ships  the  entire  tea  freights  of  the 
ports,  a  portion  of  which  would  otherwise  have  fallen  to 


—34— 

the  plaintiffs'  share.  I  can  find  no  authority  for  the 
doctrine  that  such  a  commercial  motive  deprives  of  'just 
cause  or  excuse'  acts  done  in  the  course  of  trade  which 
would  but  for  such  a  motive  be  justifiable.  So  to  hold 
would  be  to  convert  into  an  illegal  motive  the  instinct  of 
self-advancement  and  self-protection,  which  is  the  very 
incentive  to  all  trade.  To  say  that  a  man  is  to  trade 
freely,  but  that  he  is  to  stop  short  at  any  act  which  is  cal- 
culated to  harm  other  tradesmen,  and  which  is  designed 
to  attract  business  to  his  own  shop,  would  be  a  strange 
and  impossible  counsel  of  perfection.  But  we  were  told 
that  competition  ceases  to  be  the  lawful  exercise  of  trade, 
and  so  to  be  a  lawful  excuse  for  what  will  harm  another, 
if  carried  to  a  length  which  is  not  fair  or  reasonable. 
The  offering  of  reduced  rates  by  the  defendants  in  the 
present  case  is  said  to  have  been  'unfair.'  This  seems 
to  assume  that,  apart  from  fraud,  intimidation,  molesta- 
tion or  obstruction,  of  some  other  personal  right  in  rem 
or  in  personam,  there  is  some  natural  standard  of  'fair- 
ness' or  'reasonableness'  (to  be  determined  by  the  inter- 
nal consciousness  of  judges  and  juries)  beyond  which 
competition  ought  not  in  law  to  go.  There  seems  to  be 
no  authority,  and  I  think,  with  submission,  that  there  is 
no  sufficient  reason  for  such  a  proposition.  It  would  im- 
pose a  novel  fetter  upon  trade.  The  defendants,  we  are 
told  by  the  plaintiffs'  counsel,  might  lawfully  lower  rates 
provided  they  did  not  lower  them  beyond  a  'fair  freight,' 
whatever  that  may  mean.  But  where  is  it  established 
that  there  is  any  such  restriction  upon  commerce  ?  And 
what  is  to  be  the  definition  of  a  'fair  freight  ?'  It  is  said 
that  it  ought  to  be  a  normal  rate  of  freight  such  as  is 
reasonably  remunerative  to  the  shipowner.  But  over 
what  period  of  time  is  the  average  of  this  reasonable  re- 
munerativeness  to  be  calculated?  All  commercial  men 
with  capital  are  acquainted  with  the  ordinary  expedient 


—35— 

of  sowing  one  year  a  crop  of  apparently  unfruitful 
prices,  in  order  by  driving  competition  away  to  reap  a 
fuller  harvest  of  profit  in  the  future ;  and  until  the  pres- 
ent argument  at  the  bar  it  may  be  doubted  whether  ship- 
owners or  merchants  were  ever  deemed  to  be  bound  by 
law  to  conform  to  some  imaginary  'normal'  standard  of 
freights  or  prices,  or  that  Law  Courts  had  a  right  to  say 
to  them  in  respect  of  their  competitive  tariffs,  'Thus  far 
shalt  thou  go  and  no  further/'  To  attempt  to  limit  Eng- 
lish competition  in  this  way  would  probably  be  as  hope- 
less an  endeavor  as  the  experiment  of  King  Canute. 
#  *  * 

"The  means  adopted  were  competition  carried  to  a 
bitter  end.  Whether  such  means  were  unlawful  is  in 
like  manner  nothing  but  the  old  discussion  which  I  have 
gone  through,  and  which  is  now  revived  under  a  second 
head  of  inquiry,  except  so  far  as  a  combination  of  capi- 
talists differentiates  the  case  of  acts  jointly  done  by 
them  from  similar  acts  done  by  a  single  man  of  capital. 
But  I  find  it  impossible  myself  to  acquiesce  in  the  view 
that  the  English  law  places  any  such  restriction  on  the 
combination  of  capital  as  would  be  involved  in  the  rec- 
ognition of  such  a  distinction.  If  so,  one  rich  capitalist 
may  innocently  carry  competition  to  a  length  which 
would  become  unlawful  in  the  case  of  a  syndicate  with  a 
joint  capital  no  larger  than  his  own,  and  one  individual 
merchant  may  lawfully  do  that  which  a  firm  or  a  part- 
nership may  not.  What  limits,  on  such  a  theory,  would 
be  imposed  by  law  on  the  competitive  action  of  a  joint- 
stock  company,  limited,  is  a  problem  which  might  well 
puzzle  a  casuist.  The  truth  is,  that  the  combination  of 
capital  for  purposes  of  trade  and  competition  is  a  very 
different  thing  from  such  a  combination  of  several  per- 
sons against  one,  with  a  view  to  harm  him,  as  falls 
under  the  head  of  an  indictable  conspiracy.  There  is  no 


—36— 

just  cause  or  excuse  in  the  latter  class  of  cases.  There 
is  such  a  just  cause  or  excuse  in  the  former.  There 
are  cases  in  which  the  very  fact  of  a  combination  is 
evidence  of  a  design  to  do  that  which  is  hurtful  without- 
just  cause — is  evidence — to  use  a  technical  expression 
— of  malice.  But  it  is  perfectly  legitimate,  as  it  seems 
to  me,  to  combine  capital  for  all  the  mere  purposes  of 
trade  for  which  capital  may,  apart  from  combination,  be 
legitimately  used  in  trade.  To  limit  combinations  of 
capital,  when  used  for  purposes  of  competition,  in  the 
manner  proposed  by  the  argument  of  the  plaintiffs, 
would,  in  the  present  day,  be  impossible — would  be  only 
another  method  of '  attempting  to  set  boundaries  to  the 
tides." 

His  Lordship  summed  up  on  page  620  as  follows: 

aThe  substance  of  my  view  is  this,  that  competi- 
tion, however  severe  and  egotistical,  if  unattended  by 
circumstances  of  dishonesty,  intimidation,  molestation 
or  such  illegalities  as  I  have  above  referred  to,  gives  rise 
to  no  cause  of  action  at  common  law.  I  myself  should 
deem  it  to  be  a  misfortune  if  we  were  to  attempt  to  pre- 
scribe to  the  business  world  how  honest  and  peaceable 
trade  was  to  be  carried  on  in  a  case  where  no  such  illegal 
elements  as  I  have  mentioned  exist,  or  were  to  adopt 
some  btandard  of  judicial  'reasonableness,'  or  of  'normal' 
prices,  or  'fair  freights,'  to  which  commercial  adventur- 
ers, otherwise  innocent,  were  bound  to  conform." 

Lord  Fry  held  the  same  views,  and  in  another  elaborate 
opinion  he  put  the  case  on  the  same  grounds  as  did  Lord 
Bowen. 

On  page  625  he  said: 

"Now,  I  know  no  limits  to  the  right  of  competi- 
tion in  the  defendants — I  mean,  no  limits  in  law.  I 


—37— 

am  not  speaking  of  morals  or  good  manners.  To  draw 
a  line  between  fair  and  unfair  competition,  between  what 
is  reasonable  and  unreasonable,  passes  the  power  of  the 
Courts.  Competition  exists  when  two  or  more  persons 
seek  to  possess  or  to  enjoy  the  same  thing;  it  follows 
that  the  success  of  one  must  be  the  failure  of  another, 
and  no  principle  of  law  enables  us  to  interfere  with  c 
to  moderate  that  success  or  that  failure  so  long  as  it  is 
due  to  mere  competition." 

This  case  went  to  the  House  of  Lords,  Privy  Council, 
and  is  reported  in  the  Law  Reports  Appeal  cases  1892,  page 
25.  There  Lord  Halsbury,  the  Lord  Chancellor ;  Lord  Wat- 
son, Lord  MacNaghten,  Lord  Bramwell,  Lord  Morris,  Lord 
Field,  Lord  Haimen,  all  agreed  in  sustaining  the  decision  of 
the  Court  of  Appeals  by  Lord  Bowen  and  Fry. 

Lord  Halsbury  mentions  the  underbidding  for  freight 
at  Hankow,  and  on  page  37  he  says: 

"My  Lords,  after  all,  what  can  be  meant  by  'out  of 
the  ordinary  course  of  trade?'  I  should  rather  think, 
as  a  fact,  that  it  is  very  commonly  within  the  ordinary 
course  of  trade  so  to  compete  for  a  time  as  to  render 
trade  unprofitable  to  your  rival  in  order  that  when  you 
have  got  rid  of  him  you  may  appropriate  the  profits  of 
the  entire  trade  to  yourself. 

I  entirely  adopt  and  make  my  own  what  was  said 
by  Lord  Justice  Bowen  in  the  Court  below:  'All  com- 
mercial men  with  capital  are  acquainted  with  the  ordi- 
nary expedient  of  sowing  one  year  a  crop  of  apparently 
unfruitful  prices,  in  order  by  driving  competition  away 
to  reap  a  fuller  harvest  of  profit  in  the  future ;  and  until 
the  present  argument  at  the  bar  it  may  be  doubted 
whether  shipowners  or  merchants  were  ever  deemed  to 
be  bound  by  law  to  conform  to  some  imaginary  'normal' 


—38— 

standard  of  freights  or  prices,  or  that  law  courts  had  a 
right  to  say  to  them  in  respect  of  their  competitive  tariffs, 
"'Thus  far  shalt  thou  go  and  no  further.' ' 

Lord  Morris  said,  page  49 : 

"The  object  was  a  lawful  one.  It  is  not  illegal  for 
a  trader  to  aim  at  driving  a  competitor  out  of  trade,  pro- 
vided the  motive  be  his  own  gain  by  appropriation  of 
the  trade,  and  the  means  he  uses  be  lawful  weapons." 

Again  on  page  50  Lord  Morris  said : 

"Again,  what  one  trader  may  do  in  respect  of  com- 
petition, a  body  or  set  of  traders  can  lawfully  do ;  other- 
wise a  large  capitalist  could  do  what  a  number  of  small 
capitalists,  combining  together,  could  not  do,  and  thus  a 
blow  would  be  struck  at  the  very  principle  of  co-operation 
and  joint-stock  enterprise.  I  entertain  no  doubt  that  a 
body  of  traders,  whose  motive  object  is  to  promote  their 
own  trade,  can  combine  to  acquire,  and  thereby  in  so  far 
to  injure  the  trade  of  competitors,  provided  they  do  no 
more  than  is  incident  to  such  motive  object,  and  use  no 
unlawful  means. 

"In  these  days  of  instant  communication  with  al- 
most all  parts  of  the  world  competition  is  the  life  of 
trade,  and  I  am  not  aware  of  any  stage  of  competition 
called  'fair'  intermediate  between  lawful  and  unlawful. 
The  question  of  'fairness'  would  be  relegated  to  the 
idiosyncrasies  of  individual  judges.  I  can  see  no  limit 
to  competition,  except  that  you  shall  not  invade  the 
rights  of  another." 


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